Live Course on Drafting of Appeal and Reply of Penalty Notice by CA Sachin Sinha. Register Now!!

Grp-2 SM Query

Saurabh (CA - Grand Finale) (71 Points)

26 October 2010

Hello friends & experts,

What is Vertically Integrated Diversification & Concentric Diversification??

What is the difference between both?? Please give some practical examples for better understanding.

Thanx in advance!!!

Reply
Follow
Share

2 Replies

Sunshine (Helping All) (10575 Points)
Replied 26 October 2010

post the querry here...we gotta expert faculty in SM..

link...

https://www.caclubindia.com/community/crack-strategic-management-2776.asp

Sunshine (Helping All) (10575 Points)
Replied 27 October 2010

ok so...i am trying to deal with the whole of diversification...by way of diversification an org. decides to expand its business activities into new business or products.It can be in related buiness or unrelated business...

1. Vertical integration- The org will remain in the same product -process chain by way to acquiring other buisness or forming its new.This means the org enters into the business of its suppliers or intermedieries or customers .It can be of 2 types-

a. Backward integration- The org enters into business of its suppliers from whom it takes raw material and other inputs.for eg- a readymade garment manufacturer can enter into the business of cloth manufacturing too (which previously he bought from supplier) .

b.Forward integration- The organisation gets closer to the ultimate consumers by moving forward into the product process chain. eg- the readymade garment manufacturer can open its own retail outlets to sell the products.

2. Horizontal integration- The org tries to acquire the busieness of other firms in similar business. It can be of its competitors , complementary goods or by produtcs. eg- the cloth manufacturer takes over its rival firm .

3.Concentric diversification-The ogranisation expands into a new business outside the produtc process chain of existing business but still there is some connection between the new and existing business.The connection can be in terms of raw material ,technology,market.etc. So the org can take little advantage of its current processes in the new business too. for eg- Bharti Airtel which provides telecom services entered into business of broadband internet connection too.

4. Conglomarate diversification.-The org, enters into a new busiess which has no connection at all from the existing business.So its too risky as the org cant take benefit of any of its existing activities in order to stabilise in new business.There is no common thread at all .

eg- the Reliance Industries is trying to enter into education sector by opening coaching institutions......

regards,

Sneha Bagla