Download - Expansion strategies
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Expansion Strategies
Dr. Sandeep Kulshrestha
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Types of Expansion strategies
Expansion through ConcentrationExpansion through integrationExpansion through diversificationExpansion through co-operationExpansion through
InternationalisationExpansion through digitalisation
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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
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IGOR ANSOFF’S PRODUCT-MARKET MATRIX
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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.
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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
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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.
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TYPES OF INTEGRATION STRATEGIES
Horizontal IntegrationVertical Integration
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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
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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)
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DIVERSIFICATION STRATEGIES
Concentric or Related DiversificationConglomerate or Unrelated
Diversification
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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)
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Types of Concentric Diversification
Marketing-related concentric
diversification
Technology-related concentric
diversification
Marketing and Technology-related
concentric diversification
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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
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EXAMPLES OF CONGLOMERATES
TATA GROUPADITYA BIRLA GROUPITC GROUPTTK GROUPRELIANCE
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ORGANISATIONS WHICH SELDOM DIVERSIFY
Public Sector Enterprises Non Government Organisations
(NGOs)
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REASONS OF DIVERSIFICATION
Minimizing RiskCapitalize on StrengthsProvide a new perspective in business
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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
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