Growth and Diversification Strategies
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Transcript of Growth and Diversification Strategies
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GROWTH AND DIVERSIFICATION
STRATEGIESKyle Hersey, Stefan Dimitrov, Kasey Darling,
Lauren D’Amato & Khaleel Jhungeer
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Growth Growth strategies are used to increase
and expand a company’s operations
Growth is often necessary for the long-term survival of thriving companies
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Strategies Concentration
Diversification
Vertical Integration
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Concentration Involves growth by expanding existing
businesses
Focuses efforts towards a single market
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Concentrated Companies McDonalds, Wal-Mart and Starbucks
All growing by concentrating on their primary business areas and domestic expansion
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ExampleMcDonald’s locations by country
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Advantages Reduces resources needed to increase
market share Low risk in growing markets Allows companies to specialize in
specific markets Less change and easier decision
making
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Disadvantages Limited domestic growth
Can be high risk as you are putting all your eggs in one basket
Very dependant on domestic economy
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Diversification Involves adding products, services,
locations, customers, and markets to your company’s portfolio
Allows companies to reach new audiences
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Types of Diversification Concentric – new venture strategically
related to existing business
Conglomerate – new venture that has no strategic fit or relationship with existing business
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Concentric Diversification Coca-Cola’s acquisition of Minute Maid
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Conglomerate Diversification Nestlé’s acquisition of Georgio Armani
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Advantages Control of inputs leading to continuity Provides better risk control Provides movement away from declining
activities Take advantage of existing expertise Reach new markets
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Disadvantages May result in slowed growth in its core
business Adding management costs Losses may be incurred during market
consolidation Cross-nation diversification may be met
with varying, political and legal, requirements.
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Vertical Integration Form of diversification
Involves growth by acquiring companies up or down the supply chain
Backwards, Forwards or Balanced
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Backwards Vertical Integration Acquiring suppliers
Tire Company Glass Company Metal Company
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Forward Vertical Integration Acquiring distributors
Bottler
Coke Machines
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Balanced Vertical Integration Acquiring distributors & suppliers
Design Production
Retail Stores
Distribution Advertising
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Advantages Lower transactional costs
Synchronization of Supply & Demand
Quality assurance
Strategic Independence
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Disadvantages Higher coordination costs
Monopolization of markets
Higher costs when switching suppliers/ buyers
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Lets Review
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Concentration Growth by focusing on expanding a
primary business in a single market
Can involve international expansion but mostly concentrated on domestic
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Diversity Growth by expanding the markets,
products, locations or services a company offers
Concentric: acquiring related companies
Conglomerate: acquiring unrelated companies
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Vertical Integration Growth by acquiring companies
backwards or forwards in the supply chain
Forwards: acquire distributors
Backwards: acquire suppliers