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1.
Concentric
Diversification
and
Conglomeratic
Concentric Diversification Concentric diversification occurs when a firm adds related products or markets.
Conglomeratic Diversification 1. Conglomeratic diversification occurs when a firm diversifies into areas that are unrelated to its current line of business. 2. The basic purpose is to increase revenue. 3. This helps the company to get a better capital markets as company gets bigger. 4. It is known as unrelated diversification. 5. When a companys basic industry is experiencing declining annual sales, conglomeratic diversification is favorable. 6. There is high risk involved because of changes of management failure. 7. For example, A company that manufactures automobile repair parts may enter into the toy production industry.
2. The basic purpose is to obtain synergy 3. This helps the company to tap that part of market which has remained untapped. 4. It is also known as related diversification. 5. When a company is competing in a nongrowth or slow growth industry, concentric diversification is favorable. 6. It involves low market failure. 7. For example, A computer manufacture that produces PC using borrowers begins to produce laptop computers.
2. It is common much more on product industry which includes integration with both suppliers and distributors. 3. Vertical integration combines units that were not competing with each others. 4. Stoppage of goods at one point or stage will affect the functioning at all subsequent stage. 5. Advantage: To establish more control and better prices. 6. Disadvantage: Decreased Flexibility. 7. For example, Bread industry being combined with flour industry.
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2. A strategic alliance does not create a new company. 3. These agreements often have a limited scope and function, such as trading access to a strong brand for access to an emerging technology. Strategic alliances are usually undertaken to allow each company to pursue a new market, product or strategy that they can't manage on their own.
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5. Advantage: core strengths; proprietary processes, intellectual capital, research, market penetration, manufacturing and/or distribution capabilities and mostly to retain control. 6. Disadvantage: A handshake agreement. 7. contractual or
6. Disadvantage: If the joint venture fails, dividing the spoils can be a challenge. 7. For example, Dow Chemical formed a joint venture that same month with Japanese firm Ube to create a factory for a particular high-tech battery
For example, In July 2011, FaceBook announced a strategic alliance with Skype, which had been recently acquired by Microsoft.
Liquidation
A strategic alliance is a legal agreement between two or more companies to share access to their technology, trademarks or other assets.
6. 7.
A divestment is the opposite of an investment. A firm may divest (sell) businesses that are not part of its core operations so that it can focus on what it does best. Divestiture is done with a motive to obtain funds. Divestitures generate funds for the firm because it is selling one of its businesses in exchange for cash. in order to create competition.
3. A strategic alliance does not create a new company. 5. These agreements often have a limited scope and function, such as trading access to a strong brand for access to an emerging technology. Strategic alliances are usually undertaken to allow each company to pursue a new market, product or strategy that they can't manage on their own.
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7. Advantage: core strengths; proprietary processes, intellectual capital, research, market penetration, manufacturing and/or distribution capabilities and mostly to retain control. 8. Disadvantage: A contractual or handshake agreement. 8. 9. Failing
"break-up" value is sometimes believed to be greater than the value of the firm as a whole 9. under-performing 10. Divestiture has become a very popular strategy
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as firms try to focus on their core strengths, lessening their level of diversification. 11. When firm has pursued retrenchment but failed to attain needed improvements
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