` Diversification is fundamentally a negative strategy ....diversifiers are always running away from something `M.L. Kastens Discuss this assertion by Kastens, using empirical evidence to support your arguments

DIVERSIFICATION IS FUNDAMENTALLY A NEGATIVE STRATEGY-DIVRSIFIERS ARE ALWAYS RUNNING AWAY FROM SOMETHING

TABLE OF CONTENT S .No

CONTENTS Pg .No

1 . INTRODUCTION 2

2 DIVERSIFICATION AND RELATED DEFINITIONS 2

2 .1 FORMS OF DIVERSIFICATION 2

2 .2 MEANS OF DIVERSIFICATION 4

2 .3 PURPOSE OF DIVERSIFICATION 5

2 .4 DIVERSIFICATION TO REDUCE FINANCIAL RISK 7

2 .5 LIMITS TO DIVERSIFICATION 8

2 .6 CASE STUDIES 9

3 CONCLUSION 11

4 REFERENCES 12

5 BIBLIOGRAPHY 14 INTRODUCTION

Should business be diversified or focused

? This has thrown some light on this issue of diversification and has argued with empirical data 's of previous studies . It focuses on the question whether diversification is essential or not . The also provides information 's on definition of the terminologies , explains about the purpose of diversification and argues the terminology diversification in different aspects with case studies . Finally the concludes with supportive arguments for focused firms

2 . DIVERSIFICATION AND RELATED DEFINITIONS

Diversification is a growth strategy in which an organization takes on new products and new markets at the same time . According Ansoff diversification means reaching new market through new products Kieser /Kubiczek has defined diversification as expansion of product portfolio into considerably different products

2 .1 FORMS OF DIVERSIFICATION : According to Ansoff , diversification is classified into three main types : Vertical Diversification , Horizontal Diversification and Geographical Diversification ' This is further classified into Related diversification and Unrelated diversification

2 .1 .1 Related diversification , with existing product , focus on the target market for new opportunity . This commonly involves purchasing from the same vendors , using the existing management information system same distribution points etc . This includes vertical and horizontal diversification

2 .1 .1 .1 Vertical Diversification : This is a type of diversification where a variety of customers are reached through new products . Business tends to diversify along the value chain , both upstream and downstream so as the success feeds the other . Here merging is found between an upstream company producing intermediate goods and down Stream Company producing finished products or merging occurs between the buyer and the seller . The problem with vertical diversification includes , lack of expertise in the related fields and when one segment of the business experience economic downturn , all the related business are affected increasing the risk of vertical diversification includes intensified control over the buyer in a longer run could evade the possibilities of loosing the buyer

2 .1 .1 .2 Horizontal diversification : Here the customers are reached through new and unrelated products with an expansion in the market Business moves into multiple industries which is the core business . Horizontal diversification in business seems to be profitable since many of the skills available in one business can be transferred to other business when the times are tough

2 .1 .1 .3 Geographical diversification : Business tends to expand in new geographical areas to overcome restricted growth opportunity in the local market and to gain global leadership position

2 .1 .2 Unrelated diversification involves no shared aims between the two businesses . This kind of business...