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unit3&4 (Diversification (Unrelated diversification (Low opportunity…
unit3&4
Diversification
- means getting into another business.
- creating new versions or lines of product for different segments, is considered as part of the scope decision under business-level strategy.
- Relatedness is usually defined in product or technological, Unrelated diversification is also called conglomerate diversification.
- diversification may lead to risk reduction by spreading the company’s revenue sources
- Unrelated diversification
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- Related constrained diversification
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- Both operational and corporate relatedness
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vertical integration
- the company extends its
involvement in the production and distribution
- pure vertical integration cannot reduce risk because revenue is still earned from the same products and customer base
Synergy
- definition: when the value created by business units working together exceeds the value those same units create working independently
- reducing costs ,reducing risks , enhancing market power ,enhancing capabilities through learning from each other
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