Procedure Competitive Advantage in Diversified Companies

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Methodology & Competitive Advantage in Diversified Companies

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Pros & Cons of Single & Diversified Businesses Single Business: + center + clear personality -chance Diversified Business: + spreading hazard + expanded open door -unpredictability/mgt

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Strategy & Competitive Advantage in Diversified Companies Challenge is to create a multi-business, multi-industry technique. At the point when to enhance? What organizations to enter? How to enter them? Activities to help the consolidated execution/upper hand of organizations? Organizing & guiding corporate assets in right headings.

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When to broaden? Decreasing development prospects in present business Competencies & capacities promptly transferable Resources & administrative profundity to extend Increases shareholder esteem 2+2=5 What kind & what amount? Related/disconnected broadening/combo Small degree (<10% tot.rev) or huge degree Small no. of expansive organizations/substantial number of independent companies

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3 Tests for Judging a Diversification Move The business engaging quality test The cost-of-passage test The happier test

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Diversification Strategies A. Related Diversification Strategies Common methodologies: Entering business where salesforce, promoting, appropriation offices might be shared. Firmly related advances/skill Transferring know-how starting with one business then onto the next or brandname & notoriety to new item/benefit Acquiring new business that will remarkably help company's position in existing business. The more noteworthy the relatedness the greater the window for making upper hand.

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Diversification Strategies Advantages of Related Diversification... + Degree of solidarity in business exercises + Strategic fits - innovation, working, distribution/client related, administration +Economies of extension IMPORTANCE OF SKILL AT EXPLOITING LINKAGES

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Diversification Strategies B. Inconsequential Diversification Strategies Diversifying into any business with a decent benefit potential (for the most part through securing) Screening nb: targets for benefit & ROI degree of speculation required industry development potential impact on main concern of parent co. Regularly exploiting underestimated co.s/need capital

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Unrelated Diversification Strategies Advantages & Disadvantages… + assorted spread of hazard + ideal ST utilization of money related assets + more steady corporate benefits + expanded shareholder riches - unpredictability/administrative mastery - without of "fits" entire might be </= whole - hard to arrange patterned nature of ind.

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Unrelated Diversification Strategies Unrelated expansion is a budgetary way to deal with making shareholder esteem; related enhancement is a key approach. To succeed -accomplish reliably high ROI -arrange gd. procurement costs -offer at correct time -move assets at perfect time -oversee superior to if indep.

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Diversification Strategies C. Procedures for entering new business… (i) Acquisition: + faster + obstacles passage obstructions -hard to discover right organization Apply cost-of-section test

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Diversification Strategies (ii) Internal Start-up: + Good fit & control -Entry hindrance -Capital speculation -Speed Attractive when… abundant time, forceful reaction improbable, cost of section lower than obtaining, abilities exist in-house, new limit won't over-supply, industry divided.

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Diversification Strategies (iii) Joint Ventures Useful when… Independent activity uneconomical/hazardous Pooling assets brings about cooperative energy Only or best wellspring of get to

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Diversification Strategies D. Divestiture & Liquidation Strategies because of progress or mis'fit' "In the event that we weren't around here today would we need to get into it now?" When is a turnaround conceivable or not? Offer -halfway/out and out Early liquidation superior to chapter 11/consumption.

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Diversification Strategies E. Corporate turnaround, conservation & portfolio rebuilding systems Poor execution in at least one specialty units Turnaround - issues are ST, ind. is appealing Retrenchment - littler no. of organizations Restructuring - change the blend of organizations

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Diversification Strategies F. Multinational Diversification (DMNCs) Diverse organizations & national markets - Complexity of strategising crosswise over organizations & nations + open door for key coordination/manageable not open to organizations who work just locally

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Diversification Strategies Sources of Advantage for a DMNC… Fits/Economies of degree - ability, innovation, overall dispersion, bartering power, utilizing brandname. Cross sponsorship/numerous benefit asylums "Fit" preferences more dependable & practical than cross-endowment