This document discusses corporate strategy and diversification strategy. It defines corporate strategy as determining what businesses an organization will compete in and how to allocate resources. The document outlines different levels of strategy and describes four approaches to corporate strategy: exit, expand, enhance, and extend. It then focuses on diversification strategy, discussing its purpose of entering new markets and forms such as horizontal, vertical, concentric, and conglomerate diversification. The advantages and disadvantages of diversification are also summarized.

1. Strategy
By: Nazir Fahim & Team

2. What is Strategy?
Strategy is the direction and scope of an organization
in a changing business environment through the
configuration of its resources and competence with a
view to meeting stakeholder expectation.

3. Characteristics of Strategy
Long term in nature
Strategy contains elements of uncertainty
It is directed towards the goals of the organization
Dynamic in nature
Strategy are normally complex
Strategy affects the whole organization

4. Different levels of strategy
Corporate level strategy
Business level strategy
Functional level strategy

5. Corporate level strategy
Corporate level Strategy: we can simply say that
corporate level strategies are concerned with
questions about what business to compete in.
Corporate Strategy involves the careful analysis of the
selection of businesses the company can successful
compete in. Corporate level strategies affect the entire
organization and are considered delicate in the
strategic planning process.

6. Characteristics of Corporate Strategy
Corporate level strategies are formulated by the top
management.
Decisions are complex and affects the entire
organization.
It is concerned with the efficient allocation and
utilization of scarce resources for the benefit of the
organization.
Corporate level strategies are mapped out around the
goal and objectives of an organization.

7. 4 E’s to address corporate strategy
E
X
I
T
EXPAND
ENHANCE
EX
TE
N
D
EXTENSION
Adopt new business model
or enter new business
ENHANCEMENT
Add functionality or improve a
product or service that is currently
offered
EXIT
Drop a product or service line
or exit a business
EXPANSION
Add products and services
within an existing business

8. Types of corporate Strategy:
 Diversification Strategy
Entering into a new market or industry in which the business
doesn’t currently operate.
Stability Strategy
The company stops expenditures in expansion.
Growth Strategy
An organization substantially broadens the scope of one or
more of its business in terms of their respective customer
group, customer functions and alternative technologies to
improve its overall performance.

9. Diversification Strategy
Diversification strategies are used to expand firms'
operations by adding markets, products, services, or
stages of production to the existing business.
The purpose of diversification is to allow the company
to enter lines of business that are different from
current operations.

10. The role of Diversification
The role of diversification is summarized into two
ways.
1. To expand the scope of the industries and markets in
which the firms compete.
2. How managers buy, create and sell different business
to match skills and strengths with the opportunities
available to the firm.

11. Forms of Diversification
Horizontal
Horizontal diversification occurs when a firm enters a
new business (either related or unrelated) at the same
stage of production as its current operations.
e.g. Avon's (A UK based Cosmetics Direct selling co) move to
market jewelry through its door-to-door sales force involved
marketing new products through existing channels of
distribution.

12. Vertical Diversification
When a firm diversifies closer to the sources of raw
materials in the stages of production, it is following a
vertical diversification strategy.
 E.g. Avon's primary line of business has been the
selling of cosmetics door-to-door. Avon pursued a form
of vertical diversification by entering into the
production of some of its cosmetics.

13. Concentric Diversification
Concentric diversification occurs when a firm adds
related products or markets. The goal of such
diversification is to achieve strategic fit. Strategic
fit allows an organization to achieve synergy.
E.g. A TV Company pursues a diversification strategy of
producing DVD PLAYER.

14. Conglomerate Diversification
Conglomerate diversification occurs when a firm
diversifies into areas that are unrelated to its
current line of business. Synergy may result
through the application of management expertise or
financial resources, but the primary purpose of
conglomerate diversification is improved profitability
of the acquiring firm.
E.g. Tata steel, Tata salt

15. Advantages of Diversification
Reduction in risk
Profit maximization
Economic growth
Expansion of business
Better access to capital market
Increased flexibility

16. Disadvantages of Diversification
Easier to hide poorly performing business.
Performance measures usually concentrate on
financial returns.
The future success is hard to predict
Increases the burden of management.
Complexity in control of business