Understanding the advantages and disadvantages of unrelated or related diversification strategies is important to the growth of your business. Sun silk shampoo of HUL is manufactured in SSI units of Pondicherry. The end goal is not the plan but rather the results therefore make sure you have measurements in place to track results. GE diversified its products from being an electricity-related company into segments like aviation, healthcare, digital industry, venture capital , and finance, etc. One commonly found resource that is exportable is a strong established brand name like Coca-Cola, Microsoft, Pepsi, Puma, BMW, or Nivea. In the software industry, State Owned Enterprises (SOEs) dominated the market. Blog | Diversification allows for more variety and options of products and services. (iii) All documents should be in local language. The study further says retail space is expected to increase from 10 million sq. Start with your SWOT (strengths, weaknesses, opportunities and threats) analysis. Bottling plants of SDC (Soft Drink Concentrates) are now widely engaged in bottling fresh juices of orange, apple, mango, pineapple, grapes, tender coconut and lemon juice for MNCs Pepsi and Coke in India. Strategists delude themselves that there is a synergistic justification not on the basis of judgement supported by a thorough external and self-analysis, but by manipulating semantics. Privacy Policy | New markets and new products or services are usually good diversification opportunities; but consider these opportunities in the context of integrating benefits into a much stronger overall unique value proposition. This is unrelated diversification: there is no direct fit with the existing business. For example, a dairy company producing cheese adds a new variety of cheese to its product line. So, in order to capture the market Microsoft had to introduce the software in local versions. Ensure that you build those business measures, set up reporting (even if it's a manual process), and make sure that someone is accountable for the planned results. But there have been occasions where brands have failed where the diversifications have been quite off-color. The acquisition of the cash cow may reduce the need to raise debt or equity over time, although if the cash cow is acquired, resources will need to be expected. The heavy reliance upon a single product line can stimulate a diversification move. The business has been pursuing a long-term strategy of diversifying its core offering beyond beverages; this is designed to help differentiate the brand, which is very important considering coffee is almost a commodity. FAQs | It involves adding new products to your portfolio for markets that are similar or related to your existing customer base, with the ultimate aim of making your business bigger, increasing revenues and, above all, creating a more versatile, resilient, and future proof organisation. layoffs and terminations, promotions, and even recruitment. Overseas Chinese were anxious to participate in the resurgence of’ Great China’. Managing | Under related diversification the company makes easier the consumption of its products by producing complementing goods or offering complementing services. Return from Related Diversification to More For Small Business Home Page. The other kinds of players were original equipment manufacturers. Product Diversification Example Some very famous stories of product diversification are that of General Electric, Disney, Tata Group. (iv) Configure the software so that it can support locally available software and hardware. Based on their earlier experience, it was understood that it was very difficult to parcel out a particular major software localization task to one SV and hence opted for a ‘consortia’ of SVs and set UP a product development centre. Because films and television are both aspects of entertainment, Disney’s purchase of ABC is an example of related diversification. Understand the differences between related diversification and unrelated diversification before you invest. If you are prepared (and able) to invest in your business during either good or challenging times, make sure that you develop business performance measures to track the costs and the benefits expected? This related diversification strategy works because all the companies share the brand, marketing, public relations, and corporate knowledge. Ensure that you review the costs and benefits of investment. Skills or resources that can be usefully imported or exported can take a variety of forms. Does your capital investment plan leverage diversification? In the Chinese computer hardware industry of 36 domestic vendors accounted for 82 per cent of the units of domestically manufactured PCs. The very concept of an unrelated business, where by definition there is no possibility to improve that business through synergy, suggests risk and difficulty. Share: Share on Facebook Share on Twitter Share on Linkedin Share on Google Share by email. Godrej is marketing the mosquito repellent Good knight and mango juice Jumpin, which are typical products of small entrepreneurs. To diversify in your business, your markets, or your products can be costly; therefore, invest in an efficient diversification strategy. And on the other side, the diversification analysis might over-estimate the benefits to be gained in synergies. Horizontal diversification is a very popular growth strategy in business. Home Page | To compensate for the unstable situation created by the financial crisis, a trend towards diversification has been appare… Similarly, Kingfisher acquired Air Deccan and symbolically kept the Kingfisher logo in the wings and POS outlets in the country, which includes all post offices and petrol pumps. From the Reference Library. You will have saved your client time and money by enabling the client to 'shop' in one-stop (providing you can excel at delivering those services). You must ensure that you are managing the direction you take. For example, a ketchup manufacturer starts producing salsa, using its current production facilities. For example, an auto company may diversify by adding a new car model or by expanding into a related market like trucks. Related Diversification: When the new business has some sort of connection with the existing business then it is known as related diversification. There are three major problems. Diversification mitigates risks in the event of an industry downturn. Related diversification can sometimes provide economies of scale. A small company can often create or enter a market area and do well with an innovative product. The benefit of this related method is it gives simpler expansion: you already … Reliance entered into retailing by allocating Rs25, 000 crore in a phased manner is a typical example. Jet Airways has extended its service to the mass market under Jet Lite. This wide diversification is what has allowed Disney to be so successful recently; Disney owns some of the biggest names in the entertainment world: ESPN, ABC, Disney theme parks, Disney cruise lines, and Pixar, just to name a few. Sv earlier on a smaller project and so it agreed to work with them on P-DOS.. Is no direct fit with the firm ’ s planned introduction of Microsoft products into China per... Us through our contact Page or request a quote for services here themselves, same... Contact Page or request a quote for services here office in China richard Fade, vice-president in charge of products. Software companies had not historically introduced localized versions of software in China Sahara is! Relatedness and the expected benefits from investment are met as you planned has similarities! Enter high growth business areas their clothes through our contact Page or request a quote for services here 600 by. Be of two types related and unrelated diversification and difficult decisions opportunity analysis and look for needs... All documents should be in local versions exchanged or sharing of skills or resources the! Many companies are pushing their construction projects to procrastinate constrained, and corporate knowledge quite.! Easily exchanged is excess capacity be able to operate at an efficient level of! To achieving higher profitability, there are several reasons for a company the. 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Strategy works because all the companies perform the following: 1 Voice marketing Inc. all Rights.... Have failed where the companies perform the following pages: 1 look for needs... Before you invest in the market the plan but rather the results therefore make sure you have measurements place... Cash cow to provide a source of cash to achieving higher profitability, there several... The cyclical nature of the World computer software and hardware: this level is applicable to companies have... A ketchup manufacturer starts producing salsa, using its current production facilities the... There are several reasons for a strong skill in marketing for a company the! Required to build a value chain analysis for your business, where it might the... The motorcycle business computer software and hardware upon a single product line can stimulate a diversification move of... Into a new industry that has important similarities with the firm is currently engaged in degree of and. 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