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Growth and Diversification Strategies

Kyle Hersey, Stefan Dimitrov , Kasey Darling, Lauren D’Amato & Khaleel Jhungeer. Growth and Diversification Strategies. Growth. Growth strategies are used to increase and expand a company’s operations Growth is often necessary for the long-term survival of thriving companies. Strategies.

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Growth and Diversification Strategies

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  1. Kyle Hersey, Stefan Dimitrov, Kasey Darling, Lauren D’Amato & KhaleelJhungeer Growth and Diversification Strategies

  2. Growth • Growth strategies are used to increase and expand a company’s operations • Growth is often necessary for the long-term survival of thriving companies

  3. Strategies • Concentration • Diversification • Vertical Integration

  4. Concentration • Involves growth by expanding existing businesses • Focuses efforts towards a single market

  5. Concentrated Companies • McDonalds, Wal-Mart and Starbucks • All growing by concentrating on their primary business areas and domestic expansion

  6. Example McDonald’s locations by country

  7. Advantages • Reduces resources needed to increase market share • Low risk in growing markets • Allows companies to specialize in specific markets • Less change and easier decision making

  8. Disadvantages • Limited domestic growth • Can be high risk as you are putting all your eggs in one basket • Very dependant on domestic economy

  9. Diversification • Involves adding products, services, locations, customers, and markets to your company’s portfolio • Allows companies to reach new audiences

  10. Types of Diversification • Concentric – new venture strategically related to existing business • Conglomerate – new venture that has no strategic fit or relationship with existing business

  11. Concentric Diversification • Coca-Cola’s acquisition of Minute Maid

  12. Conglomerate Diversification • Nestlé’s acquisition of Georgio Armani

  13. Advantages • Control of inputs leading to continuity • Provides better risk control • Provides movement away from declining activities • Take advantage of existing expertise • Reach new markets

  14. Disadvantages • May result in slowed growth in its core business • Adding management costs • Losses may be incurred during market consolidation • Cross-nation diversification may be met with varying, political and legal, requirements.

  15. Vertical Integration • Form of diversification • Involves growth by acquiring companies up or down the supply chain • Backwards, Forwards or Balanced

  16. Backwards Vertical Integration • Acquiring suppliers Tire Company Glass Company Metal Company

  17. Forward Vertical Integration • Acquiring distributors Bottler Coke Machines

  18. Balanced Vertical Integration • Acquiring distributors & suppliers Production Design Distribution Advertising Retail Stores

  19. Advantages • Lower transactional costs • Synchronization of Supply & Demand • Quality assurance • Strategic Independence

  20. Disadvantages • Higher coordination costs • Monopolization of markets • Higher costs when switching suppliers/ buyers

  21. Lets Review

  22. Concentration • Growth by focusing on expanding a primary business in a single market • Can involve international expansion but mostly concentrated on domestic

  23. Diversity • Growth by expanding the markets, products, locations or services a company offers • Concentric: acquiring related companies • Conglomerate: acquiring unrelated companies

  24. Vertical Integration • Growth by acquiring companies backwards or forwards in the supply chain • Forwards: acquire distributors • Backwards: acquire suppliers

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