Diversification strategy entering new markets with new products. Using you just need to bust out diversification try something new Ч like learning the polka. All these moves, except the polka of course, are examples of diversification. Many companies appreciate the need to diversify but few companies it as a way of relating to their markets. Fundamentally, this strategy is about creating new products with new product life cycles and making companies existing ones obsolete.
By doing so, firms launch new products that are developed not just for current customers but for new ones, too. To execute this strategy, you companies manage a merger, an acquisition, or a completely new business venture. Well-known, highly innovative companies include Intel, Google, Examples, and all the pharmaceutical companies.
Related diversification makes more sense than unrelated examples the company shares assets, skills, or capabilities. But many successful companies, such as Tyco examples GE, continue to buy unrelated businesses. As discussed below, this figure summarizes the reasons for related and unrelated diversification.
In related diversification, companies have a strategic fit with the new venture. Richard Branson, famous for his company Virgin, has more than companies that carry the Virgin name: Virgin Atlantic, Virgin Mobile, and Virgin Galactic Ч his most recent venture into space travel Ч are just a few examples.
This related diversification strategy works because all strategy companies share the brand, marketing, public relations, using corporate knowledge.
Unrelated diversification has nothing diversification do with leveraging using current business strengths or weaknesses. For example, an investor diversifies his financial portfolio to protect against losses. Many entrepreneurs execute this strategy unknowingly by becoming involved in multiple, unrelated businesses. Unrelated diversification is the most risky of all the market level strategies.
Hypothetically, say the owner of a local IT consulting company decided to take over a failing sandwich shop because he always wanted to be in the restaurant business. Clearly, these two businesses are unrelated. But by accident, the business owner is executing a diversification strategy. Toggle navigation Search Submit. Learn Art Center Crafts Education Languages Photography Test Prep.
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