Summary- Strategies for Diversification

The article written by H. Igor Ansoff talks about the reality of the
competitive sphere in which the companies are operating and the
key to success lies in the Innovation whether at any stage or at any
phase of the business. A business can grow through majorly four
types of strategies, which are: 1. Market Development, 2. Product
Development, 3. Increased Market Penetration, 4. Diversification. If a
company accepts Diversification as a part of its planned approach,
there are certain unique problems which it has to cater to: especially
because while charting into the unmapped territories a company
requires a break with its past patterns and traditions. Thus, the
strategies so formulated need to be partly quantitative along with
partly qualitative is best suited to the long-term growth of the
company. Qualitative Criteria helps us in reducing the total number
of possibilities to a few very promising ones and then apply a ROI
measure to narrow the choice of plans. Product-Market alternatives:
1. Product Mission: is a description of the job which the product is
intended to perform. Concept of a mission helps a great deal in
describing the market alternatives than the Concept of ‘customer’. It
can also better evaluate the performance of competing products. 2.
Product-Market Strategy: a joint statement of the product line and
what all corresponding missions a product is designed to fulfil. This
further leads to the definition of the terms:

1. Market Penetration: An effort to increase the company’s sales

in tandem with original product market strategy. Improving
business performance by increasing the volume of sales to its
present customers or by finding new customers for present
products.
2. Market Development: Hereby, a company is trying to adapt its
present product line (with some characteristics) to new
missions.
3. A product development strategy: Retains the present mission
and develops products that have new and different
characteristics – to improve the performance of the mission.
 4. Diversification: It calls for simultaneous departure from preset
market product line.

Forecasting Growth: includes the identification of:

1. General Economic trends, 2. Political and International trends,

3. Industry specific trends, 4. Identifying and evaluating the
competitive strength of the firm with respect to competitors, 5.
Estimates of improvements in the company performance- Market
Penetration, Market Development, and Product Development, 6.
Manufacturing costs trends.
But it might also account for some contingencies like: A major
technological breakthrough (foreseeable characteristics yet
unforeseeable timings and the probability of occurence), an
economic recession, A major economic depression, A limited war
which would sharply increase/decrease the demand.
Objectives for Diversification: Vertical Diversification: Buying the
parts of manufactured goods from outside. It does imply both
catering to new missions and introduction of new products.
Horizontal Diversification: Introduction of new products: which
might not contribute to the present product line, cater to missions
lie within the company know-how and experience in technology,
finance, and marketing. Lateral Diversification: to move beyond the
confines of the industry in which a company belongs. It is a ‘wide-
open’ form of diversification- a company may have an intent to
range far afield from its present market structure.
Choice of direction: A vertical move to contribute to the
technological progress of the present product line. A horizontal move
- improve the coverage of military market, increase percentage of
commercial sales in Overall Sales Program, Lateral move- stabilize
sales in recession, broaden company’s technological base. Apart
from this Planning for the Unknown, Measured sales goals (having a
particular formula) to meet the long-range objectives while
evaluating the successful alternatives under a comprehensive
yardstick with on-the-go type successful alternatives reaching out to
serve our plan of contingency. Also, a Qualitative and Quantitative
Evaluation is done to measure the rate of success or failure.