Diversification allows for firms to move away from relying on single brand/service lines. It also allows for them to survive by adapting to changing markets and Demographics.
A diversified trust is a comprehensive wealth management firm that is employee-owned. The firm is based in the Southeast states such as Tennessee, Georgia and North Carolina.
Reliance is pursuing unrelated diversification strategy, it is conglomerate and has expanded into various markets; namely power sector, telecommunications, infrastructure, retail etc.
The advantage is that the wage bill is reduced, the disadvantage of the retrenchment growth strategy is that a firm may loses employee without reaching their full potential.
Minimizing cost
* INTERNATIONAL FIRM - simply do import and export - operates in foreign countries through licensing and franchising - managed by nationals of home country - concentrates in some countries or regions * GLOBAL FIRM - invests and is present in many countries - has affiliates, subsidiaries and branches in many countries - draws resources such as labor,capital and materials from a global pool - pursues global business strategy. * An International firm can become a global firm by pursuing global business strategy
Concentric Diversification
concentric
Related diversification
concentric diversification
Diversification enables the investor to reduce risk by spreading investments among different companies and types of investing.
concentric diversification Type of diversification where a firm acquires or develops new products or services (closely related to its core business or technology) to enter one or more new markets.
There are two main reasons to diversify: # diversification may benefit the firm's owners through increasing the efficiency of the firm # diversification decisions may reflect the preferences of the firm's managers Shareholder motivation for diversification: * econonomies of scale and scope * to gain synergies * to make use of internal capital markets * to diversify shareholder portfolios * to economise on transaction costs * identifying undervalued firms * when there is excess capacity * internal labour market * brand extension Management Motives: * pecuniary advantages * non-pecuniary (such as ego, social standing etc)
How can a firm implement this Strategy.
Divestiture
reduce risk by spreading investments among several assets.
A diversified trust is a comprehensive wealth management firm that is employee-owned. The firm is based in the Southeast states such as Tennessee, Georgia and North Carolina.
The extender strategy is when a firm expands into foreign markets that are similar to their current market. They use strategies that are currently successful to expand the business.