1 RE Assignment Strategic managementno

1. Please Writeon 5 Dimensions of Diversification with corporate examples.

DIVERSIFICATION:Diversification is a corporate strategy to enter into a new market or industry which the business is
not currently in, whilst also creating a new product for that new market. It is also called move
away from the core. This is most risky section of the Ansoff Matrix, as the business has no
experience in the new market and does not know if the product is going to be successful. For e.g.,
Mapro Foods manufactures Fruit Jams; Fruit beverage concentrates Crushes and Squashes; and
Fruit Bars.
Diversification is part of the four main growth strategies defined by Igor Ansoff's Product/Market
matrix.

Diversification usually requires a company to acquire new skills, new techniques and new facilities.
There is no such rule that related diversification succeeds & unrelated cannot. Six years ago, when
realty giant, Unitech, and consumer electronics maker, Videocon, announced their telecom forays,
the sector was on a fast track. Meanwhile, Reliance Industries, Bharti Enterprises and Aditya Birla
Group were gearing up to take the retail industry by storm and pouring huge amounts of money in
the business. The justification given was strikingly common-to add to shareholder value. Today,
most of these businesses have either collapsed or are struggling. Unitech has sold its entire stake to
Telenor, but not before piling up a big debt. Videocon's telecom venture is struggling. The retail
businesses of Bharti Enterprises and the Aditya Birla Group are bleeding.
We cannot say why diversification succeeds or fails, but we can always analyse and understand why
companies diversify. There are five dimensions of diversification.
1.
2.
3.
4.
5.

Diversifact
Diversification
Diversifriction
Diversifame
Diversifad

1. DIVERSIFACT:Fact is a situation reality. Many companies have no other alternatives but to diversity. Some time it
is forced, or by some business compulsions and environmental realities force companies to choose
diversification as a business strategy. And they changed drastically over a period of time. For e.g.,
WIPRO was incorporated on 29 December 1945, in Mumbai by Mohamed Premji as 'Western India
Palm Refined Oil Limited', later abbreviated to 'Wipro'. It was initially set up as a manufacturer of
vegetable and refined oils in Mumbai, Maharashtra, India under the trade names of Kisan, Sunflower
and Camel. The company logo still contains a sunflower to reflect products of the original business.

The year 1980 marked the arrival of Wipro in the IT domain. In 1982, the name was changed from
Wipro Products Limited to Wipro Limited.
United Breweries made its initial impact by manufacturing bulk beer for the British troops before
independence, which was transported in huge barrels or "Hogsheads". Kingfisher, the group's most
visible and profitable brand. The Group diversified into agro-based industries and medicines when
Mallya acquired Kissan Products and formed a long-term relationship with Hoechst AG of Germany
to create the Indian pharmaceutical company now known as Aventis Pharma, the Indian subsidiary
of the global pharma major Sanofi-Aventis.

2. DIVERSIFICTION:It is an example of business strategies proved wrong. Brand extension always succeed but for e.g.,
Much of liquor baron Vijay Mallya's current problems have manifested from his overzealous
diversification drive, which has affected even his core businesses. Along with United Spirits and
United Breweries, the group had in place a solid foundation with strong, stable cash flows and
growing profitability. However, the ambitious Mallya wanted to take the firm on another trajectory,
and hence the expansion in fertilisers, aviation, engineering and real estate.

3. DIVERSIFRICTION:This term has 3 interpretations.

a. Friction at market place is also called cannibalisation of product. In this strategy companies
are having more then one product in the same range/segment which may result into sale of
a product or brand putting pressure on sale of another product/brand of the same company.
Some time it has been done to phasing out old brand.
For e.g. TATA MOTORS is heaving small cars Indica, Vista, Nano, Zest, Manza. There IndicaVista model is doing good in small car segment. They are planning to launch new small car
TIAGO, so they have to phase out vista and offering new and more good product to
customer.
b. Friction of resources. Due to the common resource for all the product of a company, due to
limited resources all the product many not grow at the same speed and there arises friction
of prioritization. For e.g., for an automobile industries steel is a very common raw material
as a resource. But when steel is at very high in commodity market at that time company
has to take decision which product need to manufacture according to profitability.
c. Friction because of family members. For e.g., a Godrej Group could transfer the core
associations of its brand from locks to detergents as well as refrigerators, and still find
acceptance from consumers.

4. DIVERSIFAME:This describe as a two different ways.

a. Fame of the mother brand successfully extended to others. For e.g., Videocon Industries
started out primarily as a consumer durables manufacturer, but its ambitions have today
led it into a wide-ranging set of businesses, which include oil exploration,
telecommunications, financial services, direct-to-home, apart from its staple consumer
durables division. Of these businesses, the oil & gas foray has proved quite successful for

Videocon, and is likely to become a money-spinner in the coming years. The company owns
a stake in oil fields in Brazil, Indonesia and Mozambique.
b. By extending this concept to surrogate advertisements, where the product advertised and
the product intended to be advertised are different. This is mainly happened in the product
which is not legally advertised in a country. For e.g., liquor, narcotic and tobacco products.
various reputed companies started advertising surrogate products such as audio
cassettes, drinking water, soda, juices, etc., under the same brand name under which they
advertised prohibited products / commodities. Advertising is done through these surrogate
products simply to ingrain name of the brand in the mind of consumers of liquor & cigarette
which would increase sales of commodities and ultimately result in revenue generation to
the companies.
Few examples from tobacco industry of companies engaged in Surrogate Advertising in India
are: Red & White Bravery Awards, Wills Lifestyle Clothing Line, Four Square White Water
Rafting and Godfrey Phillips Bravery Awards.
Few Examples from liquor industry of companies engaged in Surrogate Advertising in India
are: Bagpiper Soda, Cassettes & CDs, Haywards Soda, Royal Challenge Golf Accessories &
Mineral Water, Kingfisher Mineral Water, White Mischief Holidays, Smirnoff Cassettes & CDs,
Imperial Blue Cassettes & CDs and Teachers Achievement Awards.
5. DIVERSIFAD:The word FAD means fashion, trend that may not last. When sectors opens up or new opportunity is
tapped many companies or business house enter the sector. This is a common and historically
proven fact that many companies had intend. Most of them died natural death ( failure or acquired
by others). At the end of business cycle three companies take away the market share, Popularly
called power of 3. This is called herd mentality.
Example of sectors where herd mentality is noticeable are small cars, e-retelling, smart phones,
low cost budget airlines, telecommunication, news channel, steel, cement, television etc.