You are expected to write 3 pages of the answer of choosen strategies The topic

Question

You are expected to write 3 pages of the answer of choosen strategies

The topic about what is this strategy ((Diversification Strategies) and you are require to answer the point below

-Demonstrate an understanding of key concepts and their application.

-Use reasoned arguments to justify your points

-Demonstrate critical thinking, analysis and justification

-Use examples to support your answer

-Plan and organize your answer with an introduction, body (Highlighting main/sub points), and conclusion

Understanding of key concepts and integrative nature of subject matter.

Ability to analyse

Ability to apply

Ability use examples

Critical thinking and writing

In all cases, strategic thinking

Diversification Strategies

Explanation / Answer

Diversification is generally associated as one of the four growth strategies as laid down by Ansoff. There is a famous Ansoff matrix that talks about 4 such strategies, viz. (i) market penetration, (ii) market development, (iii) product development and (iv) diversification. It is said that of the four strategies, the last one is the toughest one to execute. This is so since diversification involves going into market territories where the company is not currently operating in. This means right from product knowledge to marketing strategies to pricing strategies all have to be conceptualized right from scratch. However the rewards are also lucrative. If executed properly, diversification can add fresh revenue source for the company which usually follows with higher profit margins. Further, this is an effective tool for companies that have saturated business in their existing product lines.

From a theoretical perspective, diversification strategy can be of three types.

Concentric Diversification: This happens when a firm adds related product to its offering and operates somewhat in the same market. For example, when a publishing company which has traditionally done textbook printing in physical form, diversifies and creates educational material in digital form, it can be termed as Concentric Diversification.

Horizontal Diversification: This is when a firm adds products that may be commercially unrelated but they cater to the same set of segments as with the original product line. For example, Pepsi Co originally was operating in the carbonated beverage market, but when Coca Cola proved to be a formidable competition, Pepsi Co diversified into the food and snacks market and came out with products such as tortilla chips, potato chips and corn chips.

Conglomerate Diversification: This happens when a company decides to offer a new line of product that is completely different from its existing suite. Normally executed through mergers and acquisitions, the best example of this type of diversification is General Electric. Originally started as a lighting company, there are barely any areas of business that GE does not operate in. They did this by acquiring television networks, financial services firms, aerospace companies and many more.

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