|
Previous
Page - 3
In foreign context a good example of a related diversification is that of Gillette, which has diversified from its main business of razors and blades to related businesses like toiletries, tooth brushes etc. various other examples of related diversification are Johnson & Johnson, PepsiCo.
One of the potential threats of related diversification is that failure at any particular stage (backward, horizontal or forward) or in cases of recession or slow down in the industry the entire business is affected and such risk or losses are shared by other business as all are related.
2. Unrelated diversification
Common characteristics of an unrelated businesses diversification are: -
1) Unrelated diversification involves NO
a) Common linkage of strategic fit among a diversified firm's lines of business
b) Meaningful value chain interrelationships
2) Corporate strategy approach
a) Venture into "any industry & any business in which we think we can make a profit"
3) Firms pursuing unrelated diversification are referred to as CONGLOMERATES
a) NO unifying strategic theme
Some of the key advantages of diversifying into unrelated businesses are: -
Business risk is scattered over a set of truly diverse industry: as compared to related businesses, an unrelated business more closely approximates pure diversification of financial and business risks.
The company's financial resources can be employed to maximum advantage by investing in whatever industries offer best profit prospects.
Next
* Contributed by -
Ankit Kapoor & Gaurav Dubey,
PGDBM - 2006,
IMT Ghaziababd.
|
