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1. Diversification in Indian
Industry

2. What is diversification?
• The action of enlarging or varying the range so that it become more
diverse or we can say diversification means to discover new activities
which is new to country but already well established in world market.
• In business, diversification is a risk management strategy that mixes a
wide variety of investment within a portfolio.
• In agriculture, diversification means either a change in cropping
pattern or the farmers opting for other non farming options like
poultry, horticulture etc. this practice allows farmers to expand the
production, which helps generate a higher level of income.

3. Industrial diversification: Ansoff Matrix
Products
Present New
Markets
Present Market
penetration
Product
development
New Market
Development
Diversification

4. Types of industrial diversification
• Concentric Diversification: this means that there is technological
similarities between the industries.
• The company could seek new products that have technological or
marketing synergies with existing product lines appealing to a new
group of customers.
• Addition of tomato ketchup and sauce to existing Maggi brand is an
example of technological related concentric diversification.

5. Types of industrial diversification
• Horizontal diversification: the company adds new products or service
that are often technologically or commercially unrelated to current
product but that may appeal to current customers.
• For example, a company that was making notebooks earlier may also
enter the pen marker with its new product.

6. Types of industrial diversification
• Conglomerate (lateral) diversification: it means adding new products
or services that are significantly unrelated and with no technological
or commercial similarities.
• For example if a computer company decides to produce notebooks.

7. Drivers for industrial diversification
• Human resources: through human capital investment and training skilled
workers can be prepared for launching new products in new market.
• Technological development: benefiting from other larger industries
through technological catch ups and knowledge diversification in any
company may increase.
• FDI: FDI is helpful to gain access to new market or new resources to
relocate some of the their production to countries that are more
technologically advances or have a substantial pool of skilled workers.
• Government policies: development oriented government play an important
role in promoting and facilitating technological development and boosting
entrepreneurial research.
• Policies on energy and climate change

8. Reasons of diversification
• Diversification reduces risks by stabilizing profits and reduces the
vulnerability of a business to changes in its competitive environment.
Risk is reduced by spreading the investment over several businesses.
• Diversification is the method of exploiting an organization’s strengths
in innovation, technology, management and cash resource.
• If the profitability of the existing firm is likely to decline or is unlikely
to grow significantly the diversification may be a way to achieve
growth.

9. Diversification in Indian Industries
• Diversification in Indian Industries is regulated by Industries
(Development and Regulation) Act, 1951.
• Under this act license is necessary for diversification of product.
• In addition to this Companies Act, 1956, the MRTP Act, 1969 and
FERA Act were also there for restrictions.
• After 1975 policy became somehow liberal and in some product lines
diversification was allowed without license.

10. Diversification in Indian industries
• Diversification in Indian industries became more prominent after
2000.
• Large companies started to enter in new market with new products.
• Diversification in industry is generally seen by large capitalist and
industrialist of India.
• Some of the most diverse companies of India are (a) ITC (b) Reliance
Industries (c) Tata Consultancy Services (d) Hindustan Unilever (e)
HDFC Bank LTD.

11. Diversification in Indian Industries
• ITC : It is a private sector industry. It was incorporated on August 1910
under the name of Imperial Tobacco Company of India and changed
its name to ITC in the year 1974. it has presence over diverse sectors
like Cigarettes, Hotels, Paperboards, Agribusiness, Information
technology, Packaged foods.
• Reliance Industry: It is one of biggest name in Indian industry. It has
the core business of petrochemical and textiles. Now it has diverse
business in telecom, power generation, fertilizers, retail, venture
capital.

12. Diversification in Indian Industries
• Tata Consultancy Services: It is Indian multinational IT service
company headquartered in Mumbai. It offers their expertise in the
field of IT infrastructure services, business process outsourcing
services, engineering and industrial service, global consulting and
asset leveraged solution.
• Hindustan Unilever: This company was incorporated on 17th October
1933. It is one of big names in fast growing consumer good industry.
It has four business segments such as home care personal care foods
and refreshment, soap and detergents as well as beverages products
such as tea and coffee.

13. Diversification in Indian Industries
• HDFC Bank Ltd: HDFC is one of the India’s premier bank ltd. It was
founded in 1977 as the first specialized mortgage company having
headquarter in Mumbai. It has presence in banking, life insurance,
general insurance and asset management and venture capital.