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Essay / Research Paper Abstract
This 3 page paper looks art how and why firms diversify and discusses the potential benefits as well as the disadvantages and time when firms should refrain from diversification. The bibliography cites 4 sources.
Page Count:
3 pages (~225 words per page)
File: TS14_TEwhydiv.rtf
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such as competitive advantage are used to consider the way that value may be created, but there are also other strategies that expand business rather than focus on existing opportunities,
with the aim of increasing or at least protecting the business and shareholder interests. This is the strategy of diversification where firm branches out into other areas of operations, these
may be other product range, different sectors or industries and/or different geographical areas (Mintzberg et al, 2008). There are two forms
of diversification, related and unrelated, the usual motivation may be seen as the primary driver for diversification, but diversification may not always be an advisable strategy so it is just
as important to understand where and when it should be avoided. Related diversification takes place where a company enters a new market
that is related to the old markets, often using some of the existing competences that the firm has. A firm may be bottling fruit juice and realise that they have
access capacity and find that they can diversify into bottling water. Therefore, one of the derivers may be to find ways to use excess capacity in order to create
value. Howler, in many instances the diversification will have new facilities and resources required, so the maximisation of resources is only one potential reason, which will often result from an
emergent rather than a planned strategy (Thompson, 2007). In some cases where there is a shrinking market there may need to be diversification in order to survive, for example, record
companies had to move into the production of CDs otherwise they would have faced a diminishing market (Mintzberg et al. 2008). A
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