Public Domain Nike Inc. An intensive strategy shows how a company grows. Founded inNike Inc. To keep its position and competitive advantage, Nike must ensure that its generic strategy and intensive growth strategies are always suited to current business conditions.
There are three types of diversification techniques: Concentric diversification Concentric diversification involves adding similar products or services to the existing business.
For example, when a computer company that primarily produces computers starts manufacturing laptops, it is pursuing a concentric diversification strategy. Horizontal diversification Horizontal diversification involves providing new and unrelated products or services to existing consumers.
For example, a notebook manufacturer that enters the pen market is pursuing a horizontal diversification strategy. Conglomerate diversification Conglomerate diversification involves adding new products or services that are significantly unrelated and with no technological or commercial similarities.
For example, if a computer company decides to produce notebooks, the company is pursuing a conglomerate diversification strategy. Of the three types of diversification techniques, conglomerate diversification is the riskiest strategy.
Conglomerate diversification requires the company to enter a new market and sell products or services to a new consumer base. A company incurs higher research and development costs and advertising costs.
Additionally, the probability of failure is much greater in a conglomerate diversification strategy. In addition to achieving higher profitability, there are several reasons for a company to diversify. Diversification mitigates risks in the event of an industry downturn.
Diversification allows for more variety and options of products and services.
If done correctly, diversification provides a tremendous boost to brand image and company profitability. Diversification can be used as a defense.
By diversifying products or services, a company can protect itself from competing companies. In the case of a cash cow in a slow-growing market, diversification allows the company to make use of surplus cash flows.
Risks in Product Diversification Entering an unknown market puts a significant risk on a company. Therefore, companies should only pursue a diversification strategy when its current market demonstrates slow or stagnant future opportunities for growth.
To measure the riskiness or the chances of success of diversification, there are three tests used: The Attractiveness Test — The industries or markets chosen for diversification must be attractive. The Cost-of-entry Test — The cost of entry must not capitalize all future profits.Chairman's Letter to Shareholders from BlackRock's Annual Report.
My earliest lessons on the importance of investing came from my parents. My father owned a small business —a shoe store —and my mother taught English at a local university.
A pair of Nike Blazers shoes, Italian version. Nike Inc.’s generic strategy (Porter’s model) effectively supports global competitive advantage, while its intensive strategies support continued business growth.
From Competitive Advantage to Corporate Strategy. with a high average return on investment will be difficult to enter because entry barriers are high, suppliers and buyers have only modest. The study's specific research questions are to discover how diversified business units drive airline parent company strategy and vice versa, how the strategic value of an airline business unit is measured and how individual business units belonging to larger airline Groups succeed or fail.
An acquisition is a corporate action in which one company buys most or all of another company's shares to assume control. Before you begin planning a diversification strategy, write the reasons you are considering doing so.
relationships or a customer base that make it easy to enter a new market.