Table of Contents
What is concentric diversification?
a growth strategy in which a company seeks to grow and develop by adding new products to its existing product lines to attract new customers; also called convergent diversification. See: Conglomerate Diversification Horizontal Diversification.
What are the three tests that justify a business diversification decision?
These conditions can be summarized in three essential tests:
- The attractiveness test. The industries chosen for diversification must be structurally attractive or capable of being made attractive.
- The cost-of-entry test. The cost of entry must not capitalize all the future profits.
- The better-off test.
What is the relationship between diversification and performance?
Abstract. As argued in most strategic management textbooks, the relationship between diversification and performance is curvilinear and firms pursuing a related diversification strategy outperform those firms pursuing a dominant or an unrelated diversification strategy.
What is the difference between horizontal and concentric diversification?
The concentric strategy is used when a firm wants to increase its products portfolio to include like products produced within the same company, the horizontal strategy is used when the company wants to produce new products in a similar market, and the conglomerate diversification strategy is used when a company starts …
What are the five categories of businesses based on level of diversification?
The five categories of businesses determined by level of diversification are as follows: (1) single business (more than 95 per cent of revenues from a single business); (2) dominant business (between 70 and 95 per cent of revenue from a single business); (3) related constrained (less than 70 per cent of revenue from …
How diversification can enhance firm performance?
From a resource-based perspective, further benefits of diversification include the ability to exploit excess firm specific assets and share resources such as brand names, managerial skills, consumer loyalty and technological innovations.
What is diversification in business strategy?
Diversification is a growth strategy that involves entering into a new market or industry – one that your business doesn’t currently operate in – while also creating a new product for that new market.
What are the 3 primary reasons firms diversify?
There are four most often cited reasons for diversification: the internal capital market, agency problems, increased interest tax shield and growth opportunities.
What is diversification theory?
It is an investing technique used by allocating portfolio resources or capital to a mix of different investments, unequally affected by specific market volatility, to possibly offset losses in one asset class with gains in another asset class.
What is Nestlé diversification strategy?
Nestle, as part of its diversification strategy, is adding new products in its portfolio post Maggi crisis. The company also plans to expand its organic range and add more products. According to Narayanan, organic is a worldwide trend but for India and it is something which is relatively nascent.
What are the 3 primary reasons firms Diversify?