The term conglomerate refers to a single corporate group operating multiple business entities within entirely different industries. The parent company that owns all of the individual entities is known as a conglomerate, and it became one by successfully implementing a conglomerate diversification strategy. An example of conglomerate diversification would be Tata Group , which was founded in and diversified from its humble beginnings as a hotel company into a global multinational encompassing individual companies. It now employs , people across a variety of sectors such as chemicals, steel, automotive, engineering, telecommunications, information systems, and consumables.
Vertical diversification is also known as vertical integration, and occurs when a company moves up or down the supply chain by combining two or more stages of production normally operated by separate companies. This typically means the company decides to start taking over some or all of the functions related to the production and distribution of their core product, such as the purchase of raw material, manufacturing processes, assembly, distribution and sale.
Starbucks – Related Diversification
There are two forms of vertical diversification, which are identified by the direction you move in the supply chain. An example of this could be a mining company that decides it wants to expand into processing and development of its raw product. For example, Netflix began as a media distribution platform, but now manufactures its own content. After a few years of running this site successfully, the founders realized there was a demand and a gap in their industry. Once an initial round of funding was secured, they began to develop their own SEO software and market it as a subscription-based solution.
HubSpot : inbound marketing giant HubSpot began as a software solution targeting small businesses with employees who needed a more streamlined way to manage their content and customers.
The Ansoff Matrix
As their popularity and demand grew, Hubspot diversified its software to cater for enterprise-level needs. Mailchimp : In early , email software provider Mailchimp announced that they were diversifying their product and expanding into the lucrative CRM market. This caused many existing customers to exit. In summary, a diversification strategy can be a goldmine in terms of reach and revenue, but it comes with an element of risk.
How IKEA, Disney, and Berkshire Hathaway Succeed with Adjacencies
Companies should look to pursue other growth strategies first, and only consider diversification once their current product or current market no longer offers opportunities for further growth. With careful planning, analysis of customer needs, and a keen sense of current marketplace trends, a well thought out diversification strategy can be just what you need to help your business grow and evolve.
Want more marketing strategy and insights to scale your startup? An example could be an iron mining company seeking to purchase the steel factories.
Examples of Business Diversification | Small Business -
Backward vertical diversification is when the business at the end of the supply chain looks to find growth opportunities upstream. A popular example is media behemoth Netflix branching out into creating their own movies. Concentric Diversification — Concentric diversification focuses on adding products and services that are related to the main product or service that the business is known for offering, typically using the same production tools or technology tools.
An example might be a pizza company branching out to offer calzones. A famous example of this is Virgin , which started in the music industry, then diversified into transportation, and later into cellular services among other areas. With competition tight and technology the landscape at a fever pitch, diversification strategy is often the only way to reach growth goals and, at the very least, stay afloat. Six years ago, when realty giant, Unitech, and consumer electronics maker, Videocon, announced their telecom forays, the sector was on a fast track.
- forex net banking?
- Breadcrumb.
- secrets of forex scalping pdf.
Meanwhile, Reliance Industries , Bharti Enterprises and Aditya Birla Group were gearing up to take the retail industry by storm and pouring huge amounts of money in the business. The justification given was strikingly common-to add to shareholder value.
Today, most of these businesses have either collapsed or are struggling. Unitech has sold its entire stake to Telenor, but not before piling up a big debt.
- robot forex fbs gratis?
- What is diversification?.
- Diversification Strategy | .
Videocon's telecom venture is struggling. These are just a few examples in the past decade, where several leading companies have made ambitious forays into unrelated businesses. A prominent brokerage firm tried out real estate, a telecom giant entered the financial services space, an automobile maker shifted gears to move to defence equipment, and a liquor company took to the skies.
Follow and connect with us on Twitter , Facebook , Linkedin.