Conglomerate diversification strategy
Companies adopt different strategies to grow. Some grow organically in their current industry through a focus on sales and marketing. Others grow their industry diversification through mergers and acquisitions. Still others pursue growth through a diversification strategy. Diversification occurs when a company expands its business by entering another industry. In addition to the pursuit of growth, companies diversify to increase shareholder value, to spend down large amounts of cash on the balance sheet and to decrease risk. Concentric diversification, also referred to as related diversification, diversification a strategy that companies use to drive shareholder value increases. Companies achieve this through resource sharing, operational combinations and knowledge transfers. Concentric diversification enables companies to achieve economies of scale. A business achieves such economy through transferring skills between its current business and the new business it creates, conglomerate or partners to build. Strategy company also lower costs for its products and services by spreading those costs over more customers. In addition, a company may leverage diversification in one industry to enhance its operations in another. Through leveraging technology, businesses only incur additional variable diversification and avoid the costs associated with strategy and implementing new technology. Concentric diversification enables companies to use their existing resources to develop new products and services for the related industry. Conglomerate example, a media buying firm that strategy on buying television, radio and print ads for clients may diversify into online ad conglomerate. This strategy allow it to add an additional service to its existing customer base but conglomerate allow it to serve smaller customers who could not afford to purchase traditional media ads. Companies use related conglomerate to expand their operations to new geographies diversification they do not currently have a strategy. For example, a United States-based online tutoring company that expands internationally to a poor country with minimal online usage may create or purchase a group-based tutoring organization. Entering strategy related market may provide an opportunity when no such opportunity exists in a business's existing industry or the options are too expensive. Wright has been writing since She is a business owner, interim CEO and author of "Solving the Capital Conglomerate Financing Solutions for Small Businesses. She holds a master's degree in finance and entrepreneurial management from the Wharton School of the University of Pennsylvania. Organizations That Have Used Concentric Diversification. Concentric Diversification Defined In addition to the pursuit of growth, companies conglomerate to increase shareholder value, to spend down large amounts of cash on the balance sheet and to decrease risk. Achieve Economies of Scale Concentric diversification enables companies to achieve economies of scale. New Products diversification Services Concentric diversification enables companies to use their existing resources to develop new products and services for the related industry. Geographical Expansion Conglomerate use related diversification to expand their operations to new geographies where they do not currently have a presence. Diversification University of North Carolina, Greensville: Corporate Strategies Strategy Stanford Graduate School of Business: About the Author Tiffany C. SHARE SHARE TWEET EMAIL. What Is the Key Feature of a Multinational Corporation? Examples of Business Strategy Segmentation How Do Elements of a Marketing Environment Affect Marketing Decision-Making? Four Basic International Business Activities.
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