Diversification and Defensive Strategies


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Diversification and Defensive Strategies

  1. 1. DIVERSIFICATION AND DEFENSIVE STRATEGIES<br />Presented by : SheetalNarkar<br />
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  3. 3. Diversification <br />Diversification - A form of corporate strategy for a company.<br /> It seeks to increase profitability through greater sales volume obtained from new products and new markets.<br />Purpose - To allow the company to enter lines of business that are different from current operations.<br />DIVERSIFICATION:<br />
  4. 4. Diversification Strategies<br />
  5. 5. Concentric Diversification<br />Adding new but related products or services is called concentric diversification strategy.<br /> Previously Suzuki in collaboration with Maruti – Making Cars<br />Recently, Suzuki Kiashi – entered into individual car making company - making luxurious models <br />
  6. 6. Horizontal Diversification<br />Adding new, related or unrelated products or services for present costumer is called horizontal diversification strategy. <br />This strategy is not as risky as conglomerate diversification strategy, because a firm should already be familiar with its present customers.<br />Park Avenue – into garments (Traditionally) <br />Park Avenue - into cosmetics (Recently)<br />
  7. 7. Conglomerate Diversification (Lateral Diversification)<br />Adding new, unrelated products or services is called conglomerate diversification strategy.<br /> General Electric is an example of a firm<br /> that is highly diversified. GE makes <br /> locomotives, light bulbs, and refrigerators. <br /> GE manages more credit cards than American Express. GE owns more aircraft that American Airlines.<br />
  8. 8. Defensive Strategies<br />
  9. 9. Defensive Strategies<br />Defensive Strategies are marketing warfare strategies  designed to protect : <br /><ul><li>Company's market share 
  10. 10. Profitability
  11. 11. Product positioning or
  12. 12.  Mind share.</li></li></ul><li>Defensive Strategy - Principle<br />Always counter an attack with equal or greater force.<br />Defend every important market.<br />The firm should be vigilant in scanning for potential attackers. Assess the strength of the competitor. <br />The best defense is to attack yourself. Attack your weak spots and rebuild yourself anew.<br />Defensive strategies should be the exclusive domain of the market leader.<br />
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  14. 14. Joint venture strategy<br />Joint venture is a popular strategy that occurs when two or more companies form a partnership for the purpose of capitalizing on some opportunity.<br /> This strategy allows companies to improve communication and networking, to globalize operation and minimize risk.<br />Joint Venture of Maruti (51%) : Suzuki (49%)<br />Joint Venture of Tata (73.3%) : DOCOMO (26.7%)<br />
  15. 15. Retrenchment strategy<br />Retrenchment occurs when an organization regroups through cost and asset reduction to reverse declining sales and profits. <br /> In some case, bankruptcy can be an effective type of retrenchment strategy.<br />Vishal Mega Mart <br />Subhiksha Stores<br />
  16. 16. Divestiture strategy<br />Selling a division or part of an organization is called divestiture.<br /> Divestiture is often used to rise capital for further strategic acquisitions or  investment.<br /> This strategy is also useful to rid unprofitable activities in a firm.<br />IBM – PCD Divestiture (Lenovo)<br />
  17. 17. Liquidation strategy<br />Selling all of company’s assets, in parts, for their tangible worth is called liquidation. <br />However, it may be better to cease operating than to continue losing large sum of money.<br />Satyam Scam<br />
  18. 18. CONCLUSION<br />Diversification strategies are used to expand firms' operations by adding markets, products, services, or stages of production to the existing business.<br />The purpose of diversification is to allow the company to enter lines of business that are different from current operations. <br />Defensive Strategies strengthen the firm’s present position and and lessens the risk of being attacked.<br />They also help sustain any competitive advantage<br />
  19. 19. Thank You<br />