Expansion strategies

19
Expansion Strategies Dr. Sandeep Kulshrestha

description

A presentation of my recent lecture at a Business School

Transcript of Expansion strategies

Page 1: Expansion strategies

Expansion Strategies

Dr. Sandeep Kulshrestha

Page 2: Expansion strategies

Types of Expansion strategies

Expansion through ConcentrationExpansion through integrationExpansion through diversificationExpansion through co-operationExpansion through

InternationalisationExpansion through digitalisation

Page 3: Expansion strategies

CONCENTRATION STRATEGIES

When an organisation focuses on intensifying its core businesses with a view on expanding through either acquiring a new customer base or diversifying its product portfolio, it is having a concentration strategy

Page 4: Expansion strategies

IGOR ANSOFF’S PRODUCT-MARKET MATRIX

Page 5: Expansion strategies

Market Penetration - the firm seeks to achieve growth with existing products in their current market segments, aiming to increase its market share.

Market Development - the firm seeks growth by targeting its existing products to new market segments.

Product Development - the firms develops new products targeted to its existing market segments.

Diversification - the firm grows by diversifying into new businesses by developing new products for new markets.

Page 6: Expansion strategies

TYPES OF CONCENTRATION STRATEGIES

MARKET PENETRATION – Selling more products in the same market

MARKET DEVELOPMENT – Selling same products to new markets

PRODUCT DEVELOPMENT – Selling new products to the same market

Example:Bajaj Auto has undertaken all the above

mentioned strategies

Page 7: Expansion strategies

INTEGRATION STRATEGIES

Integration means combining activities related to the present activity of a company

Integration is part of the diversification strategy

It widens the scope for a company as far is the market penetration is concerned.

Page 8: Expansion strategies

TYPES OF INTEGRATION STRATEGIES

Horizontal IntegrationVertical Integration

Page 9: Expansion strategies

HORIZONTAL INTEGRATION

Horizontal Integration: When an organization takes up the same types of products at the same level of production or marketing process, it is said to follow a strategy of Horizontal Integration (Also known as Merger/Acquisition)

Example: Takeover of Satyam by Mahindras

Page 10: Expansion strategies

VERTICAL INTEGRATION

Vertical Integration: Expansion to serve its own needs. Vertical Integration is of two types, namely Backward and Forward Integration

- Backward Integration means going back to the source of raw materials

(Example: A Thermal power company may do coal-mining)

- Forward Integration implies moving closer to the finished product (example: A car spare parts manufacturer would start manufacturing passenger cars)

Page 11: Expansion strategies

DIVERSIFICATION STRATEGIES

Concentric or Related DiversificationConglomerate or Unrelated

Diversification

Page 12: Expansion strategies

CONCENTRIC OR RELATED DIVERSIFICATION

When an organization takes up related activities within a wider industry situation, it is termed as “Concentric Diversification”

Example:A sewing machine manufacturer starts

manufacturing Kitchen appliances (Wider Industry situation – Women as concentrated target group, Kitchen appliances as concentrated product range etc)

Page 13: Expansion strategies

Types of Concentric Diversification

Marketing-related concentric

diversification

Technology-related concentric

diversification

Marketing and Technology-related

concentric diversification

Page 14: Expansion strategies

Conglomerate or Unrelated Diversification A conglomerate is a combination of two or more corporations engaged in entirely different businesses that fall under one corporate group, usually involving a parent company and many subsidiaries

In other words, a conglomerate takes up such activities which are unrelated to the core business.

CONGLOMERATE OR UNRELATED DIVERSIFICATION

Page 15: Expansion strategies

EXAMPLES OF CONGLOMERATES

TATA GROUPADITYA BIRLA GROUPITC GROUPTTK GROUPRELIANCE

Page 16: Expansion strategies

ORGANISATIONS WHICH SELDOM DIVERSIFY

Public Sector Enterprises Non Government Organisations

(NGOs)

Page 17: Expansion strategies

REASONS OF DIVERSIFICATION

Minimizing RiskCapitalize on StrengthsProvide a new perspective in business

Page 18: Expansion strategies

Risks of Diversification

Unrelated diversification is complex and confusing

Diversification demand a wide variety of skills

Decreasing commitment on the core business

Often results in lossesIncreases the administrative costs

Page 19: Expansion strategies