Diversification and Defensive Strategies
30 likes18,855 views
Diversification strategies seek to increase profitability through greater sales volume from new products and markets. There are three main types: concentric adds related products, horizontal adds products for existing customers, and conglomerate adds unrelated products. Defensive strategies protect market share, profitability, and mind share. They include joint ventures, retrenchment through cost reduction, divestiture by selling divisions, and liquidation by selling all assets. Diversification and defensive strategies allow firms to expand operations and lessen risks of being attacked by competitors.
Diversification and Defensive Strategies
- 1. DIVERSIFICATION AND DEFENSIVE STRATEGIESPresented by : SheetalNarkar
- 3. Diversification Diversification - A form of corporate strategy for a company. It seeks to increase profitability through greater sales volume obtained from new products and new markets.Purpose - To allow the company to enter lines of business that are different from current operations.DIVERSIFICATION:
- 4. Diversification Strategies
- 5. Concentric DiversificationAdding new but related products or services is called concentric diversification strategy. Previously Suzuki in collaboration with Maruti – Making CarsRecently, Suzuki Kiashi – entered into individual car making company - making luxurious models
- 6. Horizontal DiversificationAdding new, related or unrelated products or services for present costumer is called horizontal diversification strategy. This strategy is not as risky as conglomerate diversification strategy, because a firm should already be familiar with its present customers.Park Avenue – into garments (Traditionally) Park Avenue - into cosmetics (Recently)
- 7. Conglomerate Diversification (Lateral Diversification)Adding new, unrelated products or services is called conglomerate diversification strategy. General Electric is an example of a firm that is highly diversified. GE makes locomotives, light bulbs, and refrigerators. GE manages more credit cards than American Express. GE owns more aircraft that American Airlines.
- 9. Defensive StrategiesDefensive Strategies are marketing warfare strategies designed to protect : Company's market share
- 10. Profitability
- 12. Mind share.Defensive Strategy - PrincipleAlways counter an attack with equal or greater force.Defend every important market.The firm should be vigilant in scanning for potential attackers. Assess the strength of the competitor. The best defense is to attack yourself. Attack your weak spots and rebuild yourself anew.Defensive strategies should be the exclusive domain of the market leader.
- 14. Joint venture strategyJoint venture is a popular strategy that occurs when two or more companies form a partnership for the purpose of capitalizing on some opportunity. This strategy allows companies to improve communication and networking, to globalize operation and minimize risk.Joint Venture of Maruti (51%) : Suzuki (49%)Joint Venture of Tata (73.3%) : DOCOMO (26.7%)
- 15. Retrenchment strategyRetrenchment occurs when an organization regroups through cost and asset reduction to reverse declining sales and profits. In some case, bankruptcy can be an effective type of retrenchment strategy.Vishal Mega Mart Subhiksha Stores
- 16. Divestiture strategySelling a division or part of an organization is called divestiture. Divestiture is often used to rise capital for further strategic acquisitions or investment. This strategy is also useful to rid unprofitable activities in a firm.IBM – PCD Divestiture (Lenovo)
- 17. Liquidation strategySelling all of company’s assets, in parts, for their tangible worth is called liquidation. However, it may be better to cease operating than to continue losing large sum of money.Satyam Scam
- 18. CONCLUSIONDiversification strategies are used to expand firms' operations by adding markets, products, services, or stages of production to the existing business.The purpose of diversification is to allow the company to enter lines of business that are different from current operations. Defensive Strategies strengthen the firm’s present position and and lessens the risk of being attacked.They also help sustain any competitive advantage
- 19. Thank You