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Market/ Product Development - Coggle Diagram
Market/ Product
Development
Reasons for corporate acquisitions
Product development
Product modification
– Small, evolutionary modifications of existing products in terms of quality, function or style
Product extension
- Extending a successful brand to similar but different products that might be purchased by the same customers
Product expansion
- Developing product variations that meet the needs of different market segments
Venture funds
Need the commitment of senior management
Investments need to be consistent with corporate strategy (‘road-map’)
Needs to be effective HR policies so as to encourage retention of talented staff
Needs access to sufficient funds
Innovation & risk (2D)
Diversification creep
Diffusion of innovation
Corporate acquisitions
DANGERS
Unknown technologies or markets makes pricing difficult
Could just be copying others
As part of a strategy, it requires venturing arms to be set up
Paying in cash may reduce investment funds & paying in shares dilutes ownership
Not being in control of acquired company
Unsuccessful assimilation
May distract management from established business
ADVANTAGES
Facilitates innovation from external source allowing gaps to be filled
Quick
External finance may be available
Can help entry into new market or consolidate existing dominance
Facilitates creation of semi-autonomous unit (culture change)
Can be highly motivating
Growth options
Corporate venturing & risk
Growth options
Industry life cycles & acquisitions
Market development
To achieve economies of scale
When key competency is the product/service
When product/service nearing the end of its life
Reasons for diversification
Economies of scope & synergy
To gain rapid market dominance
To reduce risk in privately owned businesses
Porter’s Five Forces
Types of diversification
Related diversification
Backward vertical integration
Forward vertical integration
Horizontal integration
Unrelated diversification (conglomerates)
Market typologies
Concentration
Fragmented
Consolidated
Geographic extent
Local, regional, national
Global
Life cycle
completely new
emerging
growing
mature
declining
Foreign market entry
