1. STRATEGIC MANAGEMENT
AND BUSINESS POLICY
THIRD EDITION
Chapter 5
Corporate-level strategies:
Concentration, Integration
and Diversification
AZHAR KAZMI
2. (c) Dr. Azhar Kazmi 2008 2
Learning objectives
Define and explain four types of generic
corporate-level strategies
Describe the various types of expansion
strategies
Discuss the conditions under which
concentration, integration, and
diversification strategies are used
Discuss the risks of using concentration,
integration, and diversification strategies
Discuss diversification strategies in the
Indian context
3. (c) Dr. Azhar Kazmi 2008 3
Corporate strategies
Corporate-level strategies are
basically about decisions related to:
allocating resources among the
different businesses of a firm
transferring resources from one set of
businesses to others, and
managing and nurturing a portfolio of
businesses.
5. (c) Dr. Azhar Kazmi 2008 5
Concentration strategies
Concentration is a simple, first-level
type of expansion strategy. It involves
converging resources in one or more
of a firm's businesses in terms of
their respective customer needs,
customer functions, or alternative
technologies - either singly or jointly
- in such a manner that expansion
results.
6. (c) Dr. Azhar Kazmi 2008 6
Ansoff’s product-market matrix
PRODUCT
PRESENT NEW
MARKET
MARKET PRODUCT
PRESENT PENETRATION DEVELOPMENT
MARKET DIVERSIFICATION
NEW DEVELOPMENT
Adapted from H. I. Ansoff: “Strategies for Diversification” in Harvard Business Review, 1957, 5,
pp. 113-124.
7. (c) Dr. Azhar Kazmi 2008 7
Ansoff’s matrix for diversification
strategies
------------------------------------------------------------------------- -----
New products
------------------------------------------------------------------------------
Related technology Unrelated technology
------------------------------------------------------------------------------
New functions
------------------------------------------------------------------------------
Firm its own Vertical integration
customer
------------------------------------------------------------------------------
Same type Horizontal diversification
of product
------------------------------------------------------------------------------
Similar type Marketing and Marketing related
of product technology-related concentric
diversification diversification
------------------------------------------------------------------------------
New type Technology-related Conglomerate
of product concentric diversification diversification
------------------------------------------------------------------------------
Adapted from H.I. Ansoff: Corporate Strategy (New York: McGraw-Hill, 1965), p.132.
8. (c) Dr. Azhar Kazmi 2008 8
Integration strategies
Horizontal integration: When an organisation takes up
the same type of products at the same level of
production or marketing process
Vertical integration: When an organisation starts
making new products that serve its own needs
Taper integration strategies require firms to make a
part of their own requirements and to buy the rest
from outsiders.
Quasi integration strategies firms purchase most of
their requirements from other firms in which they
have an ownership stake.
9. (c) Dr. Azhar Kazmi 2008 9
Diversification strategies
Diversification involves a substantial
change in business definition - singly
or jointly - in terms of customer
functions, customer groups, or
alternative technologies of one or
more of a firm's businesses.
10. (c) Dr. Azhar Kazmi 2008 10
Concentric or related diversification
Marketing-related concentric
diversification
Technology-related concentric
diversification
Marketing- and technology-related
concentric diversification
11. (c) Dr. Azhar Kazmi 2008 11
Conglomerate or unrelated
diversification
When an organisation adopts a
strategy which requires taking up
those activities which are unrelated to
the existing business definition of one
or more of its businesses either in
terms of their respective customer
groups, customer functions or
alternative technologies
