Corporate strategy vertical integration and diversification ppt

The fact remains; even if the success of your business depends on diversification, timing is essentially everything. Understanding the market that your business is operating in is essential to the prosperity of your diversification strategy. Taking into account the financial and human resources required to carry out diversification is equally as important. Only after you have taken the appropriate steps to determine whether or not your business is satisfactorily stable and profitable, should you consider diversification.

Although seemingly simple, this is a lengthy and detailed process, one that can be made more efficient with the assistance of a dedicated accountant or a business growth expert like Berley. By avoiding a mismanaged or ill-advised diversification plan, your business can expand and prosper. At Berley, our business growth specialists have a wealth of experience helping SMEs across London to diversify, grow and achieve success.

Working closely with you, we will construct a tailored and detailed diversification plan that can effectively grow your business, maintaining its stability in an ever-increasing competitive market. Our personalised service will ensure the careful conduction of research into your financial and corporate structure, evaluating the risks and paving the way to a successful outcome. Talking to us before you act can potentially save you time, effort and money later.

For more information on how we can help grow your business, call us on or fill in our Online Contact Form. It should not replace professional advice tailored to your specific circumstances. Close How to reach us during the Covid crisis Due to the current circumstances, the office will be closed until the ban has been lifted. If you need to contact us, email addresses and telephone numbers are as follows: Mark Levy — Partner — mark.

Understand what business support you can get from the government during the crisis here. What you need to know about diversification, a key growth strategy June 19, In Business Growth Specialists. All joint ventures are typically characterized by two or more ventures being bound by a contractual arrangement which establishes joint control. Activities, which have no contractual arrangements to establish joint control, are not joint ventures. The contractual arrangements establish joint control over the joint venturers. Such an arrangement ensures that no single venturer is in a position to unilaterally control the activity.

Joint venture may give protective or participating rights to the parties to the venture.

Protective rights merely allow a co-venturer to protect its interests in the venture in situation where its interests are likely to be adversely affected. Joint venture can be formed between a domestic company and foreign enterprise in order to flow the skills and knowledge both the ways. A joint venture by a domestic company with multinational company can allow the transfer of technology and reaching of global market.

The partners in joint venture will provide risk capital, technology, patent, trade mark, brand names and allow both the partners to reap benefit to agreed share. Joint ventures with multinational companies contribute to the expansion of production capacity, transfer of technology and capital and above all penetrating into global market. Entering into a Joint venture is a part of strategic business policy to diversity and enter into new markets, acquire finance, technology, patent and brand names.

Forms of Joint Venture :. The operation of some joint ventures involves the use of the assets and other resources of the venturers rather than the establishment of a corporation, partnership or other entity or a financial structure that is separate from the venturers themselves. Some joint ventures involve the joint control, and often the joint ownership, by the venturers of one or more assets contributed to, or acquired for the purpose of, the joint venture and dedicated to the purposes of the joint venture. A jointly controlled entity is a joint venture, which involves the establishment of a corporation, partnership or other entity in which each venturer has an interest.

Strategic Alliances :.

What is diversification?

Strategic alliance is an arrangement or agreement under which two or more firms cooperate in order to achieve certain commercial objectives. The motives behind strategic alliances are to reduce cost, technology sharing, product development, market access, availability of capital, risk sharing etc. The basic objective is to facilitate transfer of technology while implementing large objectives. The resultant benefits are shared in proportion to the contribution made by each party in achieving the targets. In strategic alliance, two or more firms that unite to pursue a set of agreed upon goals; remain independent subsequent to the formation of an alliance.

The strategic alliance agreement contains the terms like capital contribution, infrastructure, decision making, sharing of risk and return etc. A strategic alliance integrates the synergetic talents of alliance partners. Mutual understanding and trust are the basic tenets of strategic alliances. For smooth functioning of an alliance, partners are required to have preset priorities and expectations from each other. This strategy seeks to enhance the long-term competitive advantage of the firm by forming alliances with its competitors existing or potential in critical areas instead of competing with others.

In a world of fast changing technologies, changing tastes and habits of consumers, escalating fixed costs and growing protectionism — strategic alliance is an essential tool for serving customers. Franchising :. Franchising provides an immediate access to business operations and technology in profitable fields of operations. It is an important means of doing business in several countries and represents an effective combination of the advantages of large business with the motivation and adaptation capabilities of small or medium scale enterprises.

It also enables linkages of large and small businesses within a framework of vertical division of labour.

The concept of franchising is quite comprehensive and covers an extensive range of marketing and distribution arrangements for goods and services. Franchises are becoming a key mechanism for technological, marketing and service linkages between enterprises within a country as well as globally. Licensing Agreement :. A licensing agreement is a commercial contract whereby the licenser gives something of value to the licensee in exchange of certain performance and payments. Rights to produce a potential product or use a potential production process.

Licensing involves the transfer of some industrial property right from the originator. Most tend to be patents, trademarks, or technical know-how that are granted to the licensee for a specified time in return for a royalty. Another licensing strategy is to contract the manufacturing of its product line to a foreign company to exploit local comparative advantages in technology, materials or labour. The expansion or growth strategies are further classified as:. Concentration involves expansion within the existing line of business. Concentration expansion strategy involves safeguarding the present position and expanding in the current product-market space to achieve growth targets.

Such an approach is very useful for enterprises that have not fully exploited the opportunities existing in their current products-market domain. A firm selecting an intensification strategy, concentrates on its primary line of business and looks for ways to meet its growth objectives by increasing its size of operations in its primary business. When firms use their existing base to expand in the direction of their raw materials or the ultimate consumers, or, alternatively they acquire complimentary or adjacent businesses, integration takes place.

Integration basically means combining activities related to the present activity of a firm. In contrast to the intensive growth, integration strategy involves expanding externally by combining with other firms. Combination involves association and integration among different firms and is essentially driven by need for survival and also for growth by building synergies.

Combination of firms may take the merger or consolidation route. Merger implies a combination of two or more concerns into one final entity. The merged concerns go out of existence and their assets and liabilities are taken over by the acquiring company. A consolidation is a combination of two or more business units to form an entirely new company. All the original business entities cease to exist after the combination. Since mergers and consolidations involve the combination of two or more companies into a single company, the term merger is commonly used to refer to both forms of external growth.

As is the case in all the strategies, acquisition is a choice a firm has made regarding how it intends to compete. International strategy is a type of expansion strategy that requires firms to market their products or services beyond the domestic or national market.

Firm would have to assess the international environment, evaluate its own capabilities, and devise appropriate international strategy. Firms expand globally to seek opportunity to earn a return on large investments such as plant and capital equipment or research and development, or enhance market share and achieve scale economies, and also to enjoy advantages of locations.

Other motives for international expansion include extending the product life cycle, securing key resources and using low-cost labour. However, to mould their firms into truly global companies, managers must develop global mind-sets. Traditional means of operating with little cultural diversity and without global competition are no longer effective firms. International expansion is fraught with various risks such as, political risks e. International expansions increases coordination and distribution costs, and managing a global enterprise entails problems of overcoming trade barriers, logistics costs, cultural diversity, etc.

There are several methods for going international. Each method of entering an overseas market has its own advantages and disadvantages that must be carefully assessed. It is common for a firm to begin with exporting, progress to licensing, then to franchising finally leading to direct investment. As the firm achieves success at each stage, it moves to the next. If it experiences problems at any of these stages, it may not progress further.

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If adverse conditions prevail or if operations do not yield the desired returns in a reasonable time period, the firm may withdraw from the foreign market. The decision to enter a foreign market can have a significant impact on a firm. Expansion into foreign markets can be achieved through- exporting, licensing, joint venture strategic alliance or direct investment. Diversification is defined as the entry of a firm into new lines of activity, through internal or external modes. Diversification is the process of entry into a business which is new to an organisation either market-wise or technology-wise or both.

But in practice it can be both, hostile or friendly. The primary reasons a firm pursues increased diversification are value creation through economies of scale and scope, or market dominance.