Company Diversification - Essay Example

Company DiversificationIntroductionDiversification is a strategy used by the company to spread their risk across various industries in the market (Daft, et al, 2010). Economic depression and technological innovation are more likely to affect a single business organization than that one that has diversified. Apart from reducing the risk, diversification also helps in improving the values of shareholders.How the corporate management team can go about determining whether the company should diversifyThe corporate management should, first of all, decide on the new industries available that it can enter.

Similarly, it has to take into consideration the various successful paths in the industry. Some of the question that the corporate management will ask them is whether the industry has a larger access to capital, the value that the brand of the company has in the industry and the capacity it needs for its survival. The answer to this question will help the company in determining the paths to take for diversification. Similarly, the team management should identify and select the opportunities that may increase its performance as a single company and after diversifying.

The business venture that the corporate managers decide on should be that can gain from the resources of the diversified company. The management can also invest in creating sustainable competitive strategies by developing chain relationships with other companies in the industry (Daft, et al, 2010). This will enable the company to enjoy from economies of chain relationships. Similarly, the company should also prioritize on the diversification chances available in the industry. One of the strategies that the organizations can take to diversify is through acquisition.

This will help the company to enter the market quicker than other. It may decide to use internal start up or through a joint venture.Factors to consider for the diversification of the companyOne of the factors that the corporate managers should ask themselves is whether they understand the advantage competitive strength of cross-business strategy. This will help them to fathom how different strategic fits work in a company. Furthermore, it will help the company to do strength, weakness, opportunity and threat analysis of the business.

The team manager should also ask themselves whether the organization is strong enough to take fully part in the group venture. Similarly, the managers should also examine themselves whether they can afford to cope with the strategies that will thereafter be put in place. The management team also needs to prioritize diversification opportunities that are available in the industry (Daft, et al, 2010). This will help them to fathom the financial performance of other companies in the industry.Kind of the information that the corporate team should collect for the diversification of the companyThe corporate team manager needs to get some of the strategies that other companies in the industry where there want to join use in marketing their products and services.

They also need to know the level of success from those companies that joined the industry earlier have attained. The strategies used by the competitor in the market are also information that the corporate team management should consider before they get into the industry.ReferenceDaft, R. L., Kendrick, M., & Vershinina, N. (2010). Management. Andover: South-Western/Cengage Learning.