90%(42)38 out of 42 people found this document helpful
This preview shows page 1 - 2 out of 2 pages.
2. Why is a diversification strategy in the Asia-Pacific region not as easy in 2014 as it might have been in the early 1990s?Diversification strategy in the Asia Pacific region is not as easy in 2014 due to a number of reasons. One is the fact that many competitors have already diversified into previously untapped markets. In the early 1990s, some of the competitors could enter China or Vietnam or Bangladesh, and set up their operations to create value. In 2014, on the other hand, many companies have set up their operations there and thus, the growth of these markets is not as high as anticipated. In addition, the costs of entering these markets may no longer be low. For example, China used to be known as a country where labour, land and other resources can be obtained relatively cheaply. In recent times, reports have noted that setting up operations in China may no longer be considered cheap, and this has forced many MNCs to look for other countries/regions where resources can still be obtained relatively cheaply and the external environment is favourable for their operations. 5 Compare and contrast related and unrelated diversification. When will unrelated diversification be more useful?There are two types of diversification. The first type, related diversification (or concentric diversification), is about the expansion of the business based on the common core of a company’s existing resources and capabilities. With related diversification, synergy increases because the related activity can increase value and the economies of scale can save money. Unrelated diversification (or conglomerate diversification) is used to improve the profitability and lower the overall business risk of a company.
Unrelated diversification is more useful when there is no common thread of strategic fit or relationship between the new and old lines of business; the new and old businesses are unrelated.Organisations that adopt conglomerate diversification strategy may divest the unprofitable businesses without much impact on their other businesses.