Chpt 5 Updated Grand Strategies for Students
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Transcript of Chpt 5 Updated Grand Strategies for Students
In the light of above explanation, lets see Grand strategies and its different
forms
104/08/23
GRAND STRATEGIES
Stability Strat. Growth Strat Retrenchment strat Combination Strat
204/08/23
Growth Strategiesa. Intensive Growth (Concentration strategies)i. Market Penetrationii. Market Developmentiii. Product Developmentb. Integration i. Horizontal D. / merger/acquisition /takeoverii. Vertical D.
• Backward D• Forward D
c. Diversificationi. Concentricii. Conglomerateiii. Horizontal 3
d. Modernizatione. Joint Venture
04/08/23 4
Retrenchment strategy
• a. Turnaround• b. Divestment• c. Liquidation
04/08/23 5
STABILITY STRATEGY
“In an effective stability strategy, companies will concentrate their resources where the company presently has or can rapidly develop a meaningful competitive advantage in the narrowest possible product market scope consistent with the firm’s resources and market requirements.”
04/08/23 6
In order to understand how stability strategies work, here are the examples to illustrate how organization could aim at stability in each of the three dimensions of customer groups, customer functions and alternative technologies respectively.
• A packaged tea company provides special service to its institutional buyers in order to encourage bulk buying and thus improve its marketing efficiency.
• A copier machine company provides better after-sales service to its existing customers to improve its company and product image and increase sales of accessories and consumables.
04/08/23 7
• Note that all these companies here do not go beyond what they are doing presently; they serve the same markets with the present products using the existing technology. The strategies aim at stability by causing the companies to marginally improve their performance or at least letting them remain where they are in case a volatile environment and a highly competitive market. The essence of stability strategic is, therefore not doing nothing but sustaining moderate growth in line with the existing trends. Where substantial growth is aimed at, the strategy to be adopted is that of expansion.
04/08/23 8
Reasons for adopting stability strategy
• Why rock the boat • Why not stop for a while • Why to swallow risk? • Where are resources?
04/08/23 9
GROWTH / EXPANSION STRATEGIES
• Organizations generally seek growth in sales,
market share or some other measures as a primary
objective. When growth becomes a passion and
organization try to seek sizeable growth, as
against slow and steady growth it takes the shape
of an expansion strategy.
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04/08/23 11
•The firm tries to redefine the business,
enter the new businesses, or look at its
product portfolio more intensely. The firm
can have as many alternatives as it wants by
changing the mix of products, markets and
functions. Thus, the growth opportunities
may come internally or externally. Internally,
the growth may be exploited through
intensification or diversification. External
growth includes mergers, takeovers and
joint ventures.
Given below in an example to show how companies can aim at expansion either in terms of customer groups,
customer functions, or alternatives technologies.
• A chocolate manufacture expands its customer groups to include middle-aged and old persons to its existing customers comprising children and adolescents.
04/08/23 12
CRITERIA FOR ADOPTING GROWTH STRATEGY
• Growth must be manageable. The organization always must have the analysis of its strength and weaknesses against the external factors in terms of opportunities and threats.
• Growth must take into account the limitations and the demands posed by environmental factors.
• Whenever environment presents an opportunity, growth should be a natural choice.
04/08/23 13
LIMITATIONS OF GROWTH
04/08/23 14
Business firms cannot grow indefinitely. Growth has its own limitations, which are :-
• Finance: Growth, especially external growth, requires additional capital investment, which is sometimes difficult for a small firm to arrange.
• Market: Growth can be achieved to the extent that the size of market permits. If a firm grows faster than increase in the size of the market, it is likely to face failure.
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• Human Relations Problems: In a big firm, management loses personal touch with employees and customers. Motivation and morale tend to be low resulting in inefficiency.
• Management: Growth increases the functions and complexities of operations. As the number of functions and departments increase, coordination and control become very difficult. If the organization and management structure is not capable of accommodating them, growth may be harmful.
1604/08/23
• Lack of knowledge: Under conglomerate growth, a firm enters new industries and new markets about which the managers know little. Managers find it difficult to find and develop managers who can quickly handle new units and improve their earning potential against heavy odds. Many growing firms could not succeed because their managers felt that they could manage anything anywhere.
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“Forms of Growth”
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PRODUCT
MARKET
PRESENT NEW
PRESENT MARKET PENETRATION
PRODUCT DEVELOPMENT
NEW MARKET DEVELOPMENT
DIVERSIFICATION
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(A)Intensive Growth
• Market Penetration – [Present Product – Present Market]: It involves selling more products to the same market: a firm may attempt at focussing intensely on exisiting markets with its present products, using a market penetration type of concentration. Besides the primary objective of increasing usage by existing customers, market penetration strategies are also used to maintain or increase market share of present products.
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Thus, this strategy aims at increasing the
sale of present product in the present
market through aggressive promotion. The
firm penetrates deeper into the market to
capture a larger share of the market. For
example, promoting the idea of cold coffee
during the summer season. 04/08/23 21
• Market Development – [Present Product – New
Market] It implies increasing sales by selling present
products in the new markets. For example selling electronic
goods in rural areas or sale of chocolates to middle aged and
old persons. Market development leads to increase in sale of
existing products in unexplained markets.
• Product Development – [New product – Present
Market]: In this, the firm tries to grow by developing
new products for the present market.
04/08/23 22
INTEGRATION STRATEGY
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(B). Diversification • Beyond a certain point, it is no longer possible for a firm to
expand in the basic product market. So the firm seeks increased sales by developing new products for new markets. This strategy towards growth is called diversification.
• The diversification does not simply involve adding variety in a product but adding entirely different types of products. Diversification is a much-talked about and widely used strategy for growth. Many companies have opted for this.
• For example, LIC, an insurance concern initially, diversified into mutual funds. State Bank of India diversified into merchant banking and mutual funds. Similarly, Larsen and Toubro, an engineering company diversified into cement.
2404/08/23
Hallmark: An Example of Diversification for Profit Stability• Perhaps no industry is more subject to seasonal cycles that manufacturer of
greeting cards. Predictably, sales are highest at traditional holidays. Privately owned, Hallmark Cards, Inc. and its Ambassador subsidiary have a 44% share of the greeting card market . In 1910 Joyce Hall as an eighteen year old started selling post cards from his rented YMCA room in Kansas City, Missouri. In 1911 Joyce's half-brother joined the fledgling enterprise and greeting cards were added to the product line. Hall Brothers store was established specializing in postcards, gifts, books and stationary. When a 1915 fire destroyed everything, the brothers obtained a loan, bought an engraving company and began producing greeting cards in time for Christmas. In 1928 the company covered the U.S. market and introduced gift-wrap. In 1950 Hall Brothers opened their first greeting card store and in 1951 began its "Hallmark Hall of Fame" television production. The company has consistently expanded its lines of products to insure against the seasonal nature of its core product. In the 1980's Hallmark acquired Binney and Smith, manufacturer of Crayola Crayons and Magic Markers, and Univision, a Spanish language TV network. In 1990 the company acquired Dakin, manufacturer of plush toys. Hallmark also owns the portrait studio chain Picture People and continues to expand its TV programming through Hallmark Entertainment.
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Types of Diversification
a. Horizontal Integration (also known as Merger)
b. Vertical Integrationi. Backward Integrationii. Forward Integration
c. Concentric Diversificationd. Conglomerate Diversification
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• Integration basically means combining activities related to the present activity of a firm. Such a combination may be done on the basis of the Value Chain.
• Value Chain is a set of interlinked activities performed by an organization right from the procurement of basic Raw Material down to the marketing of finished product to the ultimate consumers. So a firm may move up or down the value chain to concentrate more comprehensively on the customer group, and needs than it is already servicing.
04/08/23 27
• A firm that adopts integration as the expansion strategy commits itself to adjacent business.
• Thus, integration is an expansion strategy as its adoption results in a widening of the scope of the business definition of a firm.
• Integration is also a subset of diversification strategy as it involves doing something different from what the firm has been doing previously.
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• Horizontal Integration: it happens when
an organization takes up the same type
of products at the same level of
production or marketing process, it is
said to have followed horizontal
integration.
• H.I is also known as merger. 04/08/23 29
Example, Horizontal Integration:
A luggage company taking over its rival luggage company
is Horizontal Integration (aka merger or acquisition). A
horizontal integration strategy results in a bigger size
with related benefits of a stronger competitive position
in the industry. This strategy may be adopted with a
view to expand geographically by buying a competitor’s
business, to increase the market share or to benefit
from economies of scale.
04/08/23 30
More on horizontal integration
• Merger of firms at the same stage of
production in the same industries is known as
horizontal merger.
• When the products of both firms are similar,
it is a merger of competitors. When all
producers of a good or service in a market
merge, it is the creation of a monopoly. 04/08/23 31
ABOUT MERGER
• Voluntary amalgamation of two firms on roughly equal terms into one new legal entity is known as merger.
• If the merged entities were competitors, the merger is called horizontal integration,
• If they were supplier or customer of one another, it is called vertical integration
04/08/23 32
Vertical Integration
• When an organization starts making new products that serve its own needs, vertical integration takes place. In other words, any new activity undertaken with the purpose of either supplying inputs (such as, raw materials) or serving as a customer for outputs (such as marketing of firm’s product) is a vertical integration.
• Vertical integration may be of two types—backward and forward.
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Backward integration • It involves moving toward the input of the present
product. It is aimed at moving lower on the production process so that the firm is able to supply its own raw materials or basic components. For example, a Car manufacturer may start producing tire tubes; Reliance Industries Ltd. has been able to grow largely through backward integration. It started business with textiles and went for backward integration to produce raw materials for textiles
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Forward integration
• Forward integration means the firm entering into the business of distributing or selling its present products. It refers to moving upwards in the production/distribution process towards the ultimate consumer. The firm sets up its own retail outlets for the sale of its own products. For example, many companies like Bata, DCM, Bombay Dyeing, Raymonds and Reliance have set up their own retail outlets to sell their fabrics.
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Horizontal integration differs from vertical integration in regard to the following
1. Nature: Under horizontal combination, units carrying on the same trade
or activity join together. They operate at the same stage in the industry
but in case of vertical combination, units operate at different stages of
manufacture of a product.
2. Elimination of Competition: The horizontal combination eliminates
competition among the units so combined. But it is not so in vertical
integration as the combined units were not competing with each other.
3. Control over Market: Horizontal combination may lead to full control of
a monopoly. But it is not so in case of vertical
combination.
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4. Sell-sufficiency: Horizontal combination does not lead to self-sufficiency of materials. But in vertical integration, the manufacturer of a product may integrate with the supplier of raw material. This will lead to self-sufficiency.
5. Inter-dependency: The combined units under horizontal combination are not interdependent as far as raw materials are concerned. All units operate as semi-autonomous units. The stoppage of work in one unit doesn't affect the working of others. But in case of vertical integration, there is a combination of successive stages of production. Stoppage of work at one stage will affect the functioning at all subsequent stages. For instance, bread can't be prepared if flour is not available.
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Concentric Diversification (Related Diversification)
• When an organization takes up an activity in such a manner that it is related to the existing business definition of one or more of a firm's businesses, either in terms of customer groups, customer’s functions or alternative technologies, it is concentric diversification. The relatedness is to be seen in terms of the three dimensions of the business definition. If the new business is in any way related to the original business in terms of the customer groups served, customer functions performed or alternative technologies employed, then it is related or concentric diversification.
04/08/23 38
Concentric Diversification (Related Diversification)
• When a firm diversifies into some business which is related with
its present business in terms of marketing, technology, or both,
it is called concentric diversification. When in concentric
diversification new product or service is provided with the help
of existing or similar technology it is called technology-related
concentric diversification. For example, Mother dairy has added
'curd and Lassi’ to its range of milk products. In marketing-
related concentric diversification, the new product or service is
sold through the existing distribution system. 04/08/23 39
Concentric diversification may be of three types: 1. Marketing-related concentric diversification:
A similar type of product is offered with the help of unrelated technology, e.g. a company in the sewing machine business diversifies into kitchenware and household appliances, which are sold through a chain of retail stores to family consumers. The market relatedness here is in terms of the common distribution channel for sewing machines, kitchenware and household appliances.
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2. Technology-related concentric diversification:
A new type of product or service is provided with the
help of related technology, e.g. a leasing firm offering
hire-purchase services to institutional customers also
starts consumer financing for purchase of durables to
individual customers. The technology relatedness is in
terms of the procedure of the financing service to
institutional and individual customers.
04/08/23 41
Conglomerate Diversification (Unrelated Diversification)
• When a firm diversifies into business which is not related to its existing business both in terms of marketing and technology it is called conglomerate diversification. Several Indian companies have adopted this strategy. Reliance, Sahara, DCM, Essar group, ITC, Godrej, HMT are examples of conglomerate diversification.
04/08/23 42
Why Diversification?
• It minimizes risk by spreading it over several businesses.
• It is used to capitalize on organizational strengths or minimize weaknesses.
• Sometimes, diversification may be the only way out if growth in existing businesses is blocked due to environmental and regulatory factors.
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(C)MODERNISATION
• A firm may use the strategy of modernization to achieve growth. Modernization basically involves upgradation of technology to increase production, to improve quality and to reduce wastages and cost of production. The worn-out and obsolete machines and equipment are replaced by the modern machines and equipment.
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Consider these examples • National Organic Chemicals Industries Ltd (NOCIL), a
major manufacturer of petrochemicals in the private sector, undertook a Rs 100 crore modernization plan in order to complete effectively.
• Modi Industries Ltd planned to invest Rs 30 crore for technological upgradation of its steel unit, primarily for widening its product range.
• The corporate planning team at Steel Authority of India Let (SAIL) envisages a Rs 15,000 crore capital spending programme spread over seven years to modernize its steel plants with a variety of objectives such as lower costs, energy saving, higher capacity utilization, closing down unprofitable units, etc.
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(D).Merger
• Merger is an external growth strategy. • Merger can occur in two ways: (a) Acquisition
OR takeover and (b) amalgamation.
04/08/23 46
More on horizontal integration
• Merger of firms at the same stage of production in the same or different industries is known as horizontal merger.
• When the products of both firms are similar, it is a merger of competitors. When all producers of a good or service in a market merge, it is the creation of a monopoly. If only a few competitors remain, it is termed an oligopoly.
1 August 2009 4704/08/23 47
ABOUT MERGER
• Voluntary amalgamation of two firms on roughly equal terms into one new legal entity is known as merger.
• If the merged entities were competitors, the merger is called horizontal integration,
• If they were supplier or customer of one another, it is called vertical integration
1 August 2009 4804/08/23 48
Takeover or acquisition
• Takeover or acquisition takes place when a company offers cash or securities in exchange for the majority shares of another company. It involves one company taking over control of another.
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Amalgamation
• Amalgamation takes place when two or more companies of equal size or strength formally submerge their corporate identities into a single one in a friendly atmosphere.
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(E).Joint Venture
• Joint Ventures are a special case of
consolidation where two or more companies
form a temporary partnership for a special
purpose. Once the purpose is achieved, the
joint venture is terminated, with all profits
distributed to its members or losses recovered.
Different joint ventures can take place between 04/08/23 51
a. two firms in one industry b. two firms across different
industries c. an Indian company and a foreign
company in India d. an Indian company and foreign
company in the foreign country ORe. an Indian company and a foreign
company in a third country. 04/08/23 52
A few examples of Joint Venture are:-
• Birla Yamaha Ltd. is a joint venture of Birla and Yamaha Motor Co. of Japan.
• DCM and Daewoo Corporation of Korea established DCM Daewoo Motors Ltd.
• Hindustan Computers Ltd. and Hewlett - Packard of USA formed HCL-HP Ltd, a joint venture company.
04/08/23 53
• Sony-Ericsson is a joint venture by the Japanese consumer electronics company Sony Corporation and the Swedish telecommunications company Ericsson to make mobile phones. The stated reason for this venture is to combine Sony's consumer electronics expertise with Ericsson's technological leadership in the communications sector. Both companies have stopped making their own mobile phones.
Virgin Mobile India Limited is a cellular telephone service provider company which is a joint venture between Tata Tele service and Richard Branson's Service Group. Currently, the company uses Tata's CDMA network to offer its services under the brand name Virgin Mobile, and it has also started GSM services in some states.
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• Tata Motors and Fiat signed an agreement for Joint Venture to manufacture passenger vehicles, engines etc.
• Tata Motors signed another agreement with a Brazil based company “Marcopolo” to manufacture buses for India and international markets.
• JV between Bharati Enterprises and Wal-Mart having equal stake of both (50 – 50% partnership)
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Retrenchment strategies
04/08/23 56
• Retrenchment may be done either internally or externally.
• Turnaround is type of internal retrenchment strategy.
• A more serious form of external retrenchment is in the form of divestment or liquidation.
04/08/23 57
• Retrenchment grand strategy is followed when an organization substantially reduces the scope of either its customer groups, customer functions, or alternative technologies – singly or jointly – in order to improve its performance.
• Retrenchment involves total or partial withdrawal from either a customer group, customer function, or use of an alternative technology as can be seen from the situation given below.
04/08/23 58
• A pharmaceutical firm pulls out from retail selling to concentrate on institutional selling in order to reduce its sales force and increase marketing efficiency.
• A corporate hospital decides to focus only on specially treatment and realize higher revenues by reducing its commitment to general cases which are typically less profitable to deal with
• A training institution attempts to serve a large clientele through the distance learning system and discard its fact-to-face interaction methodology of training in order its expenses and use the existing facilities and personnel more efficiently.
• In this manner, retrenchment attempts to “trim the fat” and results in a ‘slimmer’ organization bereft of unprofitable customer groups, customer functions, or alternative technologies.
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Following are the important ingredients of the Grand Retrenchment Strategy
04/08/23 60
(A).Turnaround Strategy• This strategy aims at improving the efficiency of the
firm by turning around its resources. This can be brought about by reducing assets, achieving cost reduction and increasing revenues.
• Focus in Turnaround strategy:• Restore money-losing businesses to profitability
rather than divest them.• Objective of Turnaround strategy:• Get whole firm back by curing problems of those
businesses in portfolio responsible for pulling down overall performance.
• E.g. of Turnaround Strategy:04/08/23 61
TELCO’s turnaround strategy• In this background, the top brass of the company have now
chalked out a blue print attacking various areas that need focus of attention. Indeed, there is a clear five-points turnaround strategy that has been put in place that will look at taking Telco out of the woods.
•1. Cost Management: In order to reduce the weakness of the company to the operational factors like drop in volumes, the company proposes to go for a major cost reduction drive so that the breakeven point is achieved at a much lower rate. To this effect the company has set a very aggressive cost reduction target covering three main areas: direct material cost, conversion cost and fixed cost. A cut down in the conversion cost will entail productivity improvement as well as waste reduction whereas a slash in the fixed cost will include mainly manpower cost reduction and financial cost reduction in terms of reducing the cost of capital borrowed.
•04/08/23 62
• 2. Quality Management: It is also attempting to make long-term impact through manufacturing and management initiatives. For example, in order to improve quality, Telco has adopted the Six Sigma quality enhancement standards aiming at improving the reliability, durability and quality of the product. Further, it has embarked on implementing kaizen initiatives across the company, which also aims at cost-effectiveness.
3. Financial Restructuring: The initiatives for financial restructuring can be clubbed mainly under keeping borrowings under control, making strategic disinvestments and improvement in the risk profile, under which it proposes to reduce the cost of funds by retiring high cost debt, reducing the working capital days and putting efficient credit control systems.
04/08/23 63
4. Organisational Renovation: Telco has started efforts towards right sizing by bringing down manpower by 11,500 over the last three years. The company will be concentrating both on asset and business restructuring besides cost cutting. While, marketing activity will be pepped up in the commercial vehicle line of business, non-vehicular businesses like reconditioning, providing transport solution and spares will be focused upon to reduce the cyclically of the business.
5. Product Realignment: The company plans to achieve increase the volume by targeting both new product development and aggressive marketing. Says Mr. Ravi Kant, " We will place more emphasis on new product development as it is expected to make a major difference to ward off competition."
04/08/23 64
(B).Divestment Strategy
• Divestment (also called divestiture or cutback) strategy involves the sale or liquidation of a portion of business, or a major division, or SBU. Divestment is usually a part of rehabilitation or restructuring plan and is adopted when a turnaround has been attempted but has proved to be unsuccessful. The option of a turnaround may even be ignored if it is obvious that divestment is the only answer.
04/08/23 65
Reasons for Divestment
• A firm may divest (sell) businesses that are not part of its core
operations so that it can focus on what it does best.
• Second motive to divest a part of a firm may be to create stability.
Philips, for example, divested its chip division called NXP because the
chip market was so volatile and unpredictable that NXP was
responsible for the majority of Philips's stock fluctuations while it
represented only a very small part of Philips.
04/08/23 66
• Third motive for firms to divest a part of the
company is that a division is under-performing or
even failing.
• Fourth motive for divestitures is to obtain funds.
Divestitures generate funds for the firm because it is
selling one of its businesses in exchange for cash.
04/08/23 67
Examples:• Tata group is a highly diversified entity with a range of
business under its fold. They identified their non-core businesses for divestment. TOMCO Tata Oil Mills Company – detergent and soap) was divested and sold to Hindustan Unilevers as soaps and detergent was not considered a core business for the Tatas.
• Pharmaceutical companies of Tata – Merind and Tata Pharma – were divested to Wockhardt.
• The cosmetic company – Lakme was divested and sold to HLL, as, besides being a non-core business, it was found to be non-competitive and would have required substantial investment to be sustained.
• Nihar coconut oil of HLL was divested to Marico industries ltd.
04/08/23 68
(C).Liquidation strategies
• A retrenchment strategy considered the most extreme and unattractive is liquidation strategy, which involves closing down a firm and selling its assets. It is considered as the last resort because it leads to serious consequences such as loss of employment for workers and other employees, termination of opportunities where a firm could pursue any future activities and the stigma of failure.
04/08/23 69
Why is liquidation difficult or undesirable?
• Many small-scale units, proprietorship firms, and partnership ventures liquidate frequently but medium- and large-sized companies rarely liquidate in India. This is due to variety of factors.
04/08/23 70
• The company management, government, banks and financial institution, trade unions, suppliers and creditors, and other agencies are extremely reluctant to take a decision, or ask, for liquidation.
• Each party has its own reasons for doing so. While the management may hesitate to liquidate due to the fear of failure, the government may not easily allow liquidation due to the political and other risks involved.
• Trade unions would naturally resist the loss of employment of workers. Ceasing operations does not mean that a firm is freed from its contractual obligations to the creditors and suppliers unless, of course, it is declare insolvent or bankrupt.
04/08/23 71
• Selling assets for implementing a liquidation strategy also be difficult as buyers are difficult to find. Moreover, the firm cannot expect adequate compensation as most assets, being unusable, are considered as scrap.
• Besides the practical difficulties in liquidation, there is also a psychological aspect, which cannot be overlooked. The prospects of liquidation create bad impact on the company’s (or business group’s) reputation. For many executives who are closely associated with firms, liquidation may be a traumatic experience. Despite the hesitancy on the part of all concerned with a company that intends to liquate and the difficulties in the process liquidation sometimes a firm may be forced to liquidate.
04/08/23 72
Planned liquidation • Liquidation strategy may be unpleasant as a
strategic alternative but when a “dead business is worth more than alive” it is a good proposition. For instance, the real estate by a firm may fetch it more than the actual returns of doing business. Planed liquidation would involve a systematic plan to reap the maximum benefits for the firm and its shareholders through the process of liquidation.
04/08/23 73
Exhibit: Liquidation at Empress Mills
• On May 14, 1986, the Bombay High Court appointed liquidator (a person appointed by the court of law to liquidate) in the petition for the voluntary liquidation of Empress Mills at Nagpur. Empress Mills is a 113-years-old mill owned by the Tatas. Behind the liquidation petition lie a host of reasons
• The major strategic cause for liquidation lies in the fact that for nearly the last 50 years, Empress Mills did not invest in modernization or keep pace with competition. In the wider context, government policies have not proved to be favourable for the cotton textile industry. The management of the mill carried the blame for neglect and delayed action.
04/08/23 74
• After Ratan Tata took over as Chairman of the company in 1977, some efforts were made for modernization but proved to be grossly insufficient.
• A proposal to merge the mill with other textile units of the Tatas could not materialize.
• Rationalization of the product mix across these units also proved to be a non-starter owing to resistance offered by executive.
• Efforts to negotiate a voluntary retirement scheme to cut down on the 6000 workers-employees strength also failed.
7504/08/23
• Ultimately, the banks and financial institution delayed the formulation of a rehabilitation package that could turn the mill around.
• The state government apparently did not provide the much-needed political support that could have helped save the jobs of the workers.
• The case of Empress Mills provides an important lesson that if timely strategic action is not taken and the situation is allowed to drift, even the largest business group in India, such as the Tatas, cannot save a company from inevitable death.
04/08/23 76
Concentric Diversification (extra slide from chpt – 5 ppt – other one)
(Related Diversification)• When a firm diversifies into some business which is
related with its present business in terms of marketing, technology, or both, it is called concentric diversification. When in concentric diversification new product or service is provided with the help of existing or similar technology it is called technology-related concentric diversification. For example, Mother dairy has added 'curd and Lassi’ to its range of milk products. In marketing-related concentric diversification, the new product or service is sold through the existing distribution system.
04/08/23 77