DIVERSIFICATION

‘DI-WORSE-IFICATION’
 “Companies should not
Diversify as that eats away
Resources and can destroy
Shareholder’s value.
Therefore, Companies should
have a Core focus”
 THE KEYWORDS

• Eats Away Resources

• Destroys Shareholder’s Value

• Core Focus
 “Diversification is only
required when investors do
not understand what they
are doing.”

- WARREN BUFFETT
 always lead a
business to build on
success.
All too often it converts a
highly
successful business into a
mediocre large business.”

- RICHARD
BRANSON
“The corporate strategies of
diversification of most
companies have dissipated
instead of created
shareholder value.”

- MICHAEL PORTER
DIVERSIFICATION
• "to give variety to, or to vary."

• "to extend business activities into

disparate fields"

• "to distribute investments in order to

average the risk of loss."

* NO TALK ABOUT SHAREHOLDERS*

ANSOFF MATRIX
What Ansoff Says….
• The first three strategies are usually
pursued with the same technical, financial,
and merchandising resources used for the
original product line
• Diversification usually requires a company
to acquire new skills, new techniques and
new facilities.
• Diversification is meant to be the riskiest
of the four strategies to pursue for a firm.
DISADVANTAGES

• Slowing growth in Core business.

• Addition to management costs.
• Bureaucratic complexities.
• Losses during market consolidation
process
• Negative Synergies
• Political and Legal intricacies.
COMPETITIVE STRENGTHS OF
SINGLE-BUSINESS STRATEGY
• Less Ambiguity about

 ‘Who we are’

 ‘What we do’

 ‘Where we are headed’

OPTIMUM UTILIZATION OF
RESOURCES
Improving Competitiveness

Expansion in new geographic markets

Responding to changing market

conditions

Responding to evolving customer

preferences
EROSION OF SHAREHOLDER’S
WEALTH
• COCA-COLA ACQUIRING TAYLOR WINES:
18.99%

• PACIFIC SOUTHWEST AIRLINES

DIVERSIFYING INTO CAR RENTALS &
HOTELS: 21%

• UB GROUP DIVERSIFYING INTO FORMULA

1: 12.50%
FOCUS ON CORE
FUNCTIONALITIES
• Greatness comes from focus.

• Connective Tissues that hold together a portfolio

of seemingly diverse businesses

• Funnels people’s skills and efforts to make a

greater effect.

• Have one main core competency, or a closely

related cluster of core competencies that support
each other.
• WE DON’T PREACH THAT A COMPANY SHOULD
NOT DIVERSIFY AT ALL.

• WE ARE AGAINST MINDLESS AND RECKLESS

DIVERSIFICATION.

• DIVERSIFICATION IS RATIONALIZED WHEN CORE

COMPETENCIES ARE KEPT INTACT

CORRECT TIMING IS
CRITICAL.
WHAT THE EXPERTS SAY

• THE ATTRACTIVENESS TEST

• THE COST OF ENTRY TEST

• THE BETTER OFF TEST

RIGHT TIMING PAYS

• GOOGLE

• CATERPILLAR

• VIRGIN GROUP
SUCCESSFUL SINGLE
BUSINESSES
• INTEL: Focus on Computer Chips

• WAL-MART: Focus on Lower Costs

teaming up with Quality Service

• MARUTI UDYOG LTD: Focus on

Quality Cars
FAILED DIVERSIFICATIONS

• TATA – JAGUAR

• KINGFISHER AIRLINES & FORCE INDIA

F1 TEAM BY UB GROUP

• HINDUSTAN UNILEVER
IN BUSINESS, AS IN ART, WHAT
DISTINGUISHES LEADERS FROM
LAGGARDS, AND GREATNESS
FROM MEDIOCRITY, IS THE
ABILITY TO UNIQUELY IMAGINE
WHAT COULD BE AND HAVE AN
ORIGINAL AND DISTINCTIVE
STYLE OF FOCUS.

-C.K. PRAHALAD
GARY HAMEL
(COMPETING FOR THE FUTURE)
 THANK YOU


WE ARE NOW OPEN TO

QUERIES
TEAM MEMBERS
• GAURAV MOHINDRU
• SUMIT CHAUDHRY
• PUNIT HARSH
• JATIN RANA
• RAZA KHAN
• SONIKA CHOPRA
• MAYANK SOOD
• RUCHIKA DAHIYA