Successfully reported this slideshow.
You’ve unlocked unlimited downloads on SlideShare!
Strategy involves the action plan of a company for
building competitive advantage and increasing
its triple bottom line over the long-term. The action plan
relates to achieving the economic, social, and
environmental performance objectives; in essence, it helps
bridge the gap between the long-term vision and short-
(Division level strategy)
Hierarchy of Strategy
Corporate strategy —
This strategy seeks to determine what businesses a company
should be in or wants to be in. Corporate strategy determines the
direction that the organization is going and the roles that each
business unit in the organization will plan in pursuing that direction.
The strategies of diversification can include internal development of
new products or markets, acquisition of a firm, alliance with a
complementary company, licensing of new technologies, and
distributing or importing a products line manufactured by another firm.
Generally, the final strategy involves a combination of these options.
This combination is determined in function of available opportunities
and objectives and the resources of the company.
There are two types of diversification: concentric and conglomerate.
When an organization takes up an activity in such a manner that is
related to the existing business definition of one or more of firms
businesses, either in terms of customer groups, customer’s
functions or alternative technologies, it is called concentric
According to Business Dictionary.com ‘a company uses
Concentric diversification as a means of entering new consumer
markets and driving sales in those markets ;
Example of Concentric Diversification
A sewing machine manufacturer starts manufacturing
Kitchen appliances (Wider Industry situation –
Women as concentrated target group, Kitchen
appliances as concentrated product range etc)
TV Company pursues a
diversification strategy of producing
i. When an organization competes in a no growth or a slow growth
ii. When adding new, but related, products would significantly
enhance the sale of current products.
iii. When new, but related products could be offered at highly
iv. When new, but related products have seasonal sales levels that
counter balance an organic cycle.
v. When an organization ‘s products are currently in the declining
stage of the product life cycle.
vi. When an organization has a strong management team.
Six guidelines when related diversification
may be an effective strategy as follows
Marketing-related concentric diversification
When a similar type of product is offered with the help of unrelated
Eureka Forbes which is noted for its innovative marketing practices,
has diversified into related products. It has entered into strategic
alliance with Morphy Richards, Kenwood and Nilfisk for electric iron
and food processors. They were test marketed at Bangalore. It is an
instance of Marketing-related concentric diversification
When a new type of product or service is provided with the help of
The addition of tomato ketchup and sauce to the existing "Maggi"
brand processed items of Food Specialties Ltd. is an example of
Technology-related concentric diversification
Marketing &Technology-related concentric
When a similar type of product or service is provided with the help of
Usha International has diversified into home appliances like juicer,
mixer, geyser, vacuum cleaners and washing machines and exhaust
fans and tries to exploit its distribution of network of over 3,500
dealers to sell its new products. . It is an instance of Marketing
&Technology-related concentric diversification
Advantages or Benefits
Opportunities to achieve economies of scale and scope through skill
transfers, lower costs, common brand name, technology, etc.
Opportunities to expand product or service offerings and preserve unity
Increased Market Share
Increase usage by present customers
Attract competitor‘s customers
Complexity and difficulty of coordinating different, but related businesses
(e.g. Philip Morris’ General Food and Kraft general foods)
Increase in risk and commitment
Reduction in Flexibility
Increase rate of product obsolescence
Difficulty in the supply of raw material
Concentric diversification empowers a company to build
competitive advantage over competitors. It increases market
opportunity, thereby it increases turnover and profit of the
www.coursehero.com › ... › STRATEGY › STRATEGY 603
Strategic Management-Fred R David
Strategic Management-L.M Prasad
Essentials of Strategic Management-Jones
TIME TO REFRESH
--------------------Involves diversifying into businesses whose value chains
possess competitively valuable “strategic fits” with value chain(s) of firm’s
--------------------Involves diversifying into businesses with no competitively
valuable value chain match-ups or strategic fits with firm’s present business
------------------------- strategy-driven approach
Past business of Wipro is------------------------------whether it related or