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  • Strategies of Unrelated Diversification

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    Vikram Falor
    175 vizualizări11 pagini
    This document discusses strategies of unrelated diversification, specifically looking at conglomerates. It defines conglomerates as having no common linkages or strategic fit between different business ventures. Conglomerates enter attractive industries to generate profits in a finance-driven approach. Research shows diversification discounts exist across time periods, countries, and firms. While conglomerates can spread risk, it is argued they often ignore the importance of organizational context, strategy, processes, and alignment between strategic choices and ownership structure. Examples like General Electric and Virgin Group are provided that successfully managed unrelated diversification through best practices sharing and aligning organizational processes with business and ownership choices.

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    Strategies of Unrelated Diversification

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    This document discusses strategies of unrelated diversification, specifically looking at conglomerates. It defines conglomerates as having no common linkages or strategic fit between different business ventures. Conglomerates enter attractive industries to generate profits in a finance-driven approach. Research shows diversification discounts exist across time periods, countries, and firms. While conglomerates can spread risk, it is argued they often ignore the importance of organizational context, strategy, processes, and alignment between strategic choices and ownership structure. Examples like General Electric and Virgin Group are provided that successfully managed unrelated diversification through best practices sharing and aligning organizational processes with business and ownership choices.

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    Attribution Non-Commercial (BY-NC)
    Descărcați ca PPTX, PDF, TXT sau citiți online pe Scribd
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    175 vizualizări11 pagini

    Strategies of Unrelated Diversification

    Încărcat de

    Vikram Falor
    This document discusses strategies of unrelated diversification, specifically looking at conglomerates. It defines conglomerates as having no common linkages or strategic fit between different business ventures. Conglomerates enter attractive industries to generate profits in a finance-driven approach. Research shows diversification discounts exist across time periods, countries, and firms. While conglomerates can spread risk, it is argued they often ignore the importance of organizational context, strategy, processes, and alignment between strategic choices and ownership structure. Examples like General Electric and Virgin Group are provided that successfully managed unrelated diversification through best practices sharing and aligning organizational processes with business and ownership choices.

    Drepturi de autor:

    Attribution Non-Commercial (BY-NC)
    Descărcați ca PPTX, PDF, TXT sau citiți online pe Scribd
    Indicator pentru conținut neadecvat
    din 11

    Strategies of Unrelated Diversification

    GROUP 3
    Amit Shukla Divya Mehrotra Santosh Krishnan Vikram Falor

    Summary

    Overview of the article

    Conglomerates

    No common linkage or element of strategic fit. No meaningful value-chain inter-relation. Venture into attractive industries which have potential for profits. Finance driven approach to creating shareholder value.

    Why do Conglomerates exist?

    The Existence of diversification discounts

    Generalizability

    Across time periods Across countries Across firms in the same market & point in time

    Can Conglomerates add value?

    Context

    How well do markets function?

    Market Intermediaries? How well do they function? Organizational Processes Alignment with choice of businesses & ownership structure

    Conglomerate
    Effective Strategy strategy to add value?

    Conglomerates - Arguments

    Ignoring the role of context Ignoring the role of strategy Focusing on the business mix rather than organizational processes Ignoring alignment between strategic choices

    Understanding

    Examples

    Conglomerates
    Objectives

    Reasons

    Spreading Business Risk

    Growth ambition

    Spread across industries, markets & consumers

    Extraordinary growth in assets, profits & income

    Optimization of Investments

    Flexibility of portfolio

    From cash rich to investment centric businesses

    Counter vulnerability Diversification as a long term strategy

    Potential opportunities for investments

    Opportunities & Uncertainties

    Drawbacks

    Fresh opportunities

    Demand on Corporate Management Cannot capture synergies

    Surplus Resources

    General Electric

    Alignment of organizational process with the choice of business.

    Portfolio selection

    Alignment of initiatives with each other.

    Best practices of each business first after Best practice sharing


    Ability to manage a large, complex, multi-business organization.

    Alignment with ownership structure.

    Examples
    The Virgin Group

    ITC Limited

    Mobile technology to transportation, financial services, vacation, music, and retailing.

    FMCG, Hotels, Paperboards & Packaging, Agribusiness, IT Strategy Development:


    200 branded companies worldwide.


    We are in exciting markets which are set to benefit considerably from technological developments in distribution and fulfilment Strategy Development:

    Creating multiple drivers of growth. Kept intact the core competencies distribution reach, brand building capabilities, supply-chain management.

    Strategic Partnership Risk Mitigation Strategy

    Thank you.

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