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Employment of new technologies focus on multiple

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Employment of new technologies.Focus on multiple products.Reduceriskbyoperatinginmultiple product markets.Defend against takeover bids.Provide executive interest.Figure: Related vs. Unrelated Diversification© The Institute of Chartered Accountants of India
4.11CORPORATE LEVEL STRATEGIES(iii) Concentric Diversification:Concentric diversification too amounts torelated diversification. In concentric diversification, the new business islinked to the existing businesses through process, technology or marketing.Thenewproductisaspin-offfromtheexistingfacilitiesandproducts/processes. This means that in concentric diversification too, thereare benefits of synergy with the current operations. However, concentricdiversification differs from vertically integrated diversification in the natureof the linkage the new product has with the existing ones. While in verticallyintegrated diversification, the new product falls within the firm’s currentprocess-product chain, in concentric diversification, there is a departurefrom this vertical linkage. The new product is only connected in a loop-likemanneratoneormorepointsinthefirm’sexistingprocess/technology/product chain.(iv) Conglomerate Diversification:In conglomerate diversification, no suchlinkages exist; the new businesses/products are disjointed from the existingbusinesses/products in every way; it is a totally unrelated diversification. Inprocess/technology/function, there is no connection between the newproducts and the existing ones. Conglomerate diversification has nocommon thread at all with the firm’s present position.For example, Acement manufacturer diversifies into the manufacture of steel and rubberproducts.2.Expansion through Mergers and AcquisitionsAcquisition or merger with an existing concern is an instant means of achievingthe expansion. It is an attractive and tempting proposition in the sense that itcircumvents the time, risks and skills involved in screening internal growthopportunities, seizing them and building up the necessary resource base requiredto materialise growth. Organizations consider merger and acquisition proposals ina systematic manner, so that the marriage will be mutually beneficial, a happy andlasting affair.Apart from the urge to grow, acquisitions and mergers are resorted to forpurposes of achieving a measure of synergy between the parent and the acquiredenterprises. Synergy may result from such bases as physical facilities, technicaland managerial skills, distribution channels, general administration, research anddevelopment and so on. Only positive synergistic effects are relevant in thisconnection which denotes that the positive effects of the merged resources aregreater than the some of the effects of the individual resources before merger oracquisition.

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