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Expansion strategies

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A presentation of my recent lecture at a Business School

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Expansion strategies

  1. 1. ExpansionStrategiesDr. Sandeep Kulshrestha
  2. 2. Types of Expansion strategiesExpansion through ConcentrationExpansion through integrationExpansion through diversificationExpansion through co-operationExpansion through InternationalisationExpansion through digitalisation
  3. 3. CONCENTRATION STRATEGIESWhen an organisation focuses on intensifying its core businesses with a view on expanding through either acquiring a new customer base or diversifying its product portfolio, it is having a concentration strategy
  4. 4. IGOR ANSOFF’S PRODUCT-MARKET MATRIX
  5. 5.  Market Penetration - the firm seeks to achieve growth with existing products in their current market segments, aiming to increase its market share. Market Development - the firm seeks growth by targeting its existing products to new market segments. Product Development - the firms develops new products targeted to its existing market segments. Diversification - the firm grows by diversifying into new businesses by developing new products for new markets.
  6. 6. TYPES OF CONCENTRATION STRATEGIESMARKET PENETRATION – Selling more products in the same marketMARKET DEVELOPMENT – Selling same products to new marketsPRODUCT DEVELOPMENT – Selling new products to the same marketExample:Bajaj Auto has undertaken all the above mentioned strategies
  7. 7. INTEGRATION STRATEGIESIntegration means combining activities related to the present activity of a companyIntegration is part of the diversification strategyIt widens the scope for a company as far is the market penetration is concerned.
  8. 8. TYPES OF INTEGRATION STRATEGIESHorizontal IntegrationVertical Integration
  9. 9. HORIZONTAL INTEGRATIONHorizontal Integration: When an organization takes up the same types of products at the same level of production or marketing process, it is said to follow a strategy of Horizontal Integration (Also known as Merger/Acquisition)Example: Takeover of Satyam by Mahindras
  10. 10. VERTICAL INTEGRATION Vertical Integration: Expansion to serve its own needs. Vertical Integration is of two types, namely Backward and Forward Integration - Backward Integration means going back to the source of raw materials(Example: A Thermal power company may do coal-mining) - Forward Integration implies moving closer to the finished product (example: A car spare parts manufacturer would start manufacturing passenger cars)
  11. 11. DIVERSIFICATION STRATEGIESConcentric or Related DiversificationConglomerate or Unrelated Diversification
  12. 12. CONCENTRIC OR RELATED DIVERSIFICATIONWhen an organization takes up related activities within a wider industry situation, it is termed as “Concentric Diversification”Example:A sewing machine manufacturer starts manufacturing Kitchen appliances (Wider Industry situation – Women as concentrated target group, Kitchen appliances as concentrated product range etc)
  13. 13. Types of Concentric Diversification Marketing Marketing- Technology- and related related Technology- concentric concentric relateddiversification diversification concentric diversification
  14. 14. CONGLOMERATE OR UNRELATED DIVERSIFICATION A conglomerate is a Unrelated of two Conglomerate or combination Diversification or more corporations engaged in entirely different businesses that fall under one corporate group, usually involving a parent company and many subsidiariesIn other words, a conglomerate takes up such activities which are unrelated to the core business.
  15. 15. EXAMPLES OF CONGLOMERATESTATA GROUPADITYA BIRLA GROUPITC GROUPTTK GROUPRELIANCE
  16. 16. ORGANISATIONS WHICH SELDOM DIVERSIFYPublic Sector EnterprisesNon Government Organisations (NGOs)
  17. 17. REASONS OF DIVERSIFICATIONMinimizing RiskCapitalize on StrengthsProvide a new perspective in business
  18. 18. Risks of DiversificationUnrelated diversification is complex and confusingDiversification demand a wide variety of skillsDecreasing commitment on the core businessOften results in lossesIncreases the administrative costs

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