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The specific types of diversified growth strategies group are. Integrated growth and diversification strategies. Centered diversification strategy




Integrated growth strategies

Concentrated Growth Strategies

TOPIC 8. Basic (reference) business development strategies

Consider the most common, practice-tested and widely covered in the literature business development strategies. They reflect four different approaches to the growth of the firm and are associated with a change in the state of one or more the following items: product; market; industry; position of the firm within the industry; technology. Each of these five elements can be in one of two states: the existing state or the new state. For example, in relation to a product, this could be a decision to either produce the same product or move on to manufacturing a new product.

first group reference strategies make up the so-called concentrated growth strategies, those. those that are related to product and/or market change and do not affect the other three elements. The specific types of strategies of the first group are as follows:

- market position strengthening strategy, in which the company does everything to win the best positions with this product in this market; even “horizontal integration” is possible, in which the firm tries to establish control over its competitors;

- strategy market development, which consists in finding new markets for an already produced product;

- product development strategy, which involves solving the problem of growth through the production of a new product that will be sold in an already mastered market.

The second group of reference strategies includes such business strategies that are related to the fact that the company is expanding by adding new structures. These strategies are called integrated growth strategies, of which there are two main types:

- reverse vertical integration strategy, which is aimed at the growth of the company through the acquisition or strengthening of control over suppliers, in connection with which the dependence on fluctuations in prices for components and suppliers' requests is reduced.

- Forward vertical integration strategy, which is expressed in the growth of the firm through the acquisition or strengthening of control over the structures located between the firm and the end user, namely distribution and sales systems. This type of integration is very beneficial when intermediary services are greatly expanded or when the firm cannot find intermediaries with a quality level of work.

The third group of reference business development strategies are diversified growth strategies, which are implemented if firms can no longer develop in a given market with a given product within a given industry.


Let us formulate the main factors that determine the choice of a diversified growth strategy:

Markets for ongoing business are in a state of saturation or reduction in demand for the product;

The current business gives in excess of the needs of the receipt of money, which can be profitably invested in other areas of the business;

A new business can generate synergies, for example through better use of equipment, components, raw materials, etc.; (synergism - "a whole of strong parts")

Antitrust regulation does not allow further expansion of business within the industry;

Tax losses can be reduced;

Access to world markets can be facilitated;

New qualified employees can be brought in or the potential of existing managers can be better utilized.

The main types of diversified growth strategies are as follows:

centered diversification strategies, which are based on the search and use of additional opportunities for the production of new products, which are concluded in the existing business, i.e. existing production remains at the center of the business, and a new one arises based on the opportunities that are contained in the developed market, the technology used, etc.;

- horizontal diversification strategy, which involves looking for growth opportunities in an existing market through new products that require a new technology that is different from the one used. Because a new product should be focused on the consumer of the main product, then in terms of its qualities it should be concomitant with the already produced product;

- conglomerate diversification strategy, which consists in the fact that the company expands by producing technologically unrelated new products that are sold in new markets. This is one of the most complex development strategies, because its successful implementation depends on many factors, in particular, on the competence of the existing staff and especially managers; seasonality in the life of the market; availability of necessary funds, etc.

In an effort to expand and develop your business, you must adhere to a certain plan and sequence of decisions and actions. Otherwise, if you act at random, thoughtlessly and suddenly, you can not only not move anywhere, but also lose what you have already acquired. And after all, battles are won rather by good strategists than by the commanders of the most numerous and well-equipped army.

In the modern business system, there are four main (reference) business development strategies: a concentrated growth strategy, an integrated growth strategy, a diversified growth strategy, and a reduction strategy. Each of these systems is applicable in its own situation and solves a number of specific issues.

Strategies can be applied in their pure form, or they can be combined and combined, for example, using the methods of an integrated growth strategy and diversification at the same time.

Integrated growth strategies

A stable enterprise that has mastered its market well and established itself in it can try to apply integrated growth strategies. In a nutshell, this is the expansion of activities through the acquisition of new enterprises and industries or by increasing internal structures.

In turn, integrated growth strategies are divided into reverse vertical integration and forward vertical integration approaches.

Reverse vertical integration strategy

If an enterprise organizes new supply and purchasing departments, acquires firms that supply raw materials, opens new offices that do not produce the main product, but, for example, spare parts or raw materials for it - this is all called the application of a reverse vertical integration strategy.

This approach allows you to reduce procurement costs and keep abreast of the situation with raw materials on the market.

Forward vertical integration strategy

Forward-going vertical integration implies a reduction in the number of intermediaries between the enterprise itself and the end consumer. Using this strategy, you can buy out intermediary firms, hire new employees who will be engaged in intermediary activities, or even open your own branded stores instead of selling products to other entities.

Diversified Growth Strategies

Sooner or later, for any large enterprise, there comes a moment when the industry market is fully mastered, and all the changes that one could think of have already been made to the product. However, I want innovation and development. That's when it's time to apply diversified growth strategies.

In turn, this reference business development strategy is divided into three approaches:

  • horizontal diversification strategy;
  • centered diversification strategy;
  • strategy of conglomerate (conglomerate) diversification.

Horizontal diversification strategy

Virtually any enterprise involved in the production of any product can find a new industry in which it can apply its product. For example, a pharmaceutical manufacturer may purchase an operating pharmacy, a grain processing enterprise - a confectionery factory, and so on.

This is the approach (strategy) of horizontal diversification: you continue to work with the available raw materials and personnel, but at the same time expand your horizons.

Centered diversification strategy

The centered diversification strategy involves the release of a new product, using a completely new technology, but focused on the same consumer. On the one hand, this is a complex process that requires management to master a new area of ​​​​knowledge and, possibly, a new approach to management, not everyone may be ready for this and cope with it. On the other hand, in case of successful implementation of the plan, the company will successfully invest funds, consolidate its position in several markets at once.

Such a strategy is pursued, for example, by the management of the Hilton hotel chain, a brand known for its high class and level of service. Now management is building a chain of suburban hotels, with a much lower price and smaller areas, but maintaining the same level of service and maintaining the comfort and modernity of the rooms.

Conglomerate diversification strategy

p> Conglomerative (conglomerate) diversification involves the development of a perfect new market and a new product that has nothing to do with existing products and industries. The calculation in this case is based on the recognition by the consumer trademark. Of course, only a large and successful event can afford such a risk, but if successful, there is a chance to get another profitable business.

So, for example, a large Ukrainian Iron and Steel Works For several years, Zaporizhstal has been producing high quality sausage products, recognizable and loved by the consumer.

Course work


by subject

"Strategic Management"



"Types of Diversified Growth Strategies"


Moscow 2010

Introduction


The dynamism of development and the globalization of the modern world economy have necessitated diversification as a way to reduce the risks of uncertainty in the external environment and increase the competitiveness of companies.

The diversification of companies was most developed in the mid-1950s. This was facilitated by the falling rate of return on capital invested in traditional production. In the United States and a number of other countries, the diversification process has been accelerated by the adoption of antitrust laws. Traditionally, Japanese and South Korean companies are widely diversified, which is primarily due to the need to conquer foreign markets.

Diversification is undertaken by companies from different industries. The greatest degree of diversification was achieved by the concerns of Germany and Japan, which belong to the type of diversified companies, mainly metallurgical ones. As priority areas diversification, they chose mechanical engineering and engineering services.

Since the mid-90s of the last century, the process of diversification of Russian ferrous metallurgy companies has intensified. The reason for this was the change in the global situation in terms of increased demand and prices for metal products, which, in turn, led to an improvement in the economic situation of metallurgical enterprises and an increase in their profits. As a result, large industrial structures with varying degrees of diversification are beginning to be created in Russia.

At present, the diversification of Russian companies is complicated by the lack of an effective system of state regulation of this process.

The application of diversification in practice is ahead of theoretical developments on this issue. There is no holistic and justified mechanism for the development of companies based on diversification, coordinated with the processes of reform and restructuring of industry at the state level. The theoretical and methodological apparatus associated with assessing the feasibility of diversification and indicators that ensure the choice of optimal options has been developed extremely poorly and needs to be further developed.

The relevance of studying the types of diversified growth strategies is determined by the fact that the diversification strategy is today a factor in increasing the efficiency of an organization as a result of its competitiveness.

Describing the degree of scientific development of the types of diversified growth strategies, it should be noted that this topic has already been analyzed by various authors in various publications: textbooks, monographs, periodicals and on the Internet. Nevertheless, the analysis of the literature showed the fragmentation and fragmentation of the conceptual apparatus of diversification, the lack of a holistic approach to its definition.

The scientific significance of this work lies in the optimization and streamlining of the existing scientific and methodological base on the issues under study - another independent author's study. The practical significance of the topic "Types of strategies for diversified growth" consists in the analysis of problems in both time and space sections.

The object of study of this work is the types of diversified growth strategies.

The subject of the study is particular issues of diversified growth strategies.

The purpose of this work is to form the basis for the adoption of corporate strategic decisions that create rather than destroy company value.

Tasks. To achieve this goal, several tasks must be solved:

.identify the specifics of the diversification strategy;

.consider the types of diversification strategies and their scope;

.determine the relative merits of diversification and strategic alliances in terms of leveraging the relationships between different businesses.

This course work consists of an introduction, four chapters, a conclusion and a bibliography.

The first chapter explains what strategy is and explores its role in the success of an organization and people. It introduces the basic concepts and definitions with which strategic management operates.

The second chapter examines the essence of the diversification strategy itself, gives the basic concepts related to this issue, and also examines the factors that are the basis for the application of this strategy to analyze decisions regarding diversification.

Chapter Three deals with the types of diversified growth strategies.

The fourth chapter highlights the advantages and disadvantages of a diversification strategy.

strategy organization diversification growth


1. Theoretical foundations of the strategic development of the enterprise


An enterprise is a production unit, which is an integral organism, consisting of several functional subsystems. The efficiency of the enterprise as a whole depends on the quality of the work of these subsystems. Strategic planning is of fundamental importance.


1.1 Strategy - concept and definitions


Strategy - an integrated model of actions designed to achieve the goals of the enterprise. The content of the strategy is a set of decision rules used to determine the main directions of activity.

There are two opposing views on the understanding of strategy in the literature. In the first case, strategy is a specific long-term plan to achieve some goal, and strategy development is the process of finding some goal and drawing up a long-term plan. This approach is based on the fact that all emerging changes are predictable, the processes occurring in the environment are deterministic and can be fully controlled and managed.

In the second case, the strategy is understood as a long-term qualitatively defined direction of the development of the enterprise, relating to the scope, means and form of its activities, the system of intra-production relations, as well as the positions of the enterprise in environment. With this understanding, the strategy can be described as a chosen direction of activity, the functioning and within which should lead the organization to achieve its goals.

In business life, strategy refers to the overall concept of how an organization achieves its goals, solves its problems, and allocates the limited resources needed to do so. Such a concept (corresponding to the strategy of the second type) includes several elements. First of all, they include a system of goals, including the mission, corporate and specific goals. Another element of the strategy is a policy, or a set of specific rules for organizational actions aimed at achieving the set goals.

Usually, a strategy is developed for several years ahead, specified in various projects, programs, practical actions, and implemented in the process of their implementation. Significant expenditure of labor and time of many people required to create an enterprise strategy does not allow it to be changed often or seriously adjusted. Therefore, it is formulated in rather general terms. This is the intended strategy.

At the same time, both inside and outside the organization, new unforeseen circumstances appear that do not fit into the original concept of the strategy. They can, for example, open up new development prospects and opportunities for improving the existing state of affairs, or, conversely, force the abandonment of a proposed policy and plan of action. In the latter case, the original strategy becomes unrealizable and the enterprise proceeds to the consideration and formulation of urgent strategic tasks.

Main distinctive features strategies were identified by I. Ansoff in his book “Strategic Management”, 1989:

1.The strategizing process does not end with any immediate action. It usually ends with the establishment of general directions, the promotion of which will ensure the growth and strengthening of the company's position.

2.The formulated strategy should be used to develop strategic projects using the search method. The role of strategy in search is, first, to help focus attention on certain areas and opportunities; second, to discard all other possibilities as incompatible with the strategy.

.The need for a strategy disappears as soon as the real course of development will lead the organization to the desired events.

.While formulating a strategy, it is not possible to foresee all the possibilities that will open up when drafting specific activities. Therefore, one has to use highly generalized, incomplete and inaccurate information about various alternatives.

.As the search process uncovers specific alternatives, more accurate information emerges. However, it may call into question the validity of the original strategic choice. Therefore, the successful use of the strategy is impossible without feedback.

.Since both strategies and benchmarks are used to select projects, it might seem that they are one and the same. But these are different things. The benchmark is the goal that the company is trying to achieve, and the strategy is the means to achieve the goal. Landmarks are a higher level of decision making. A strategy that is justified under one set of benchmarks will not be justified if the organization's benchmarks change.

.Finally, strategy and guidelines are interchangeable both at individual moments and at different levels of the organization. Some performance parameters (for example, market share) may serve as benchmarks for the firm at one moment, and become its strategy at another. Further, since guidelines and strategies are developed within the organization, a typical hierarchy arises: what is at the top levels of management are elements of the strategy, at the lower turns into guidelines.


1.2 Reference development strategies


The most common, verified by practice and widely covered in the literature, business development strategies are usually called basic, or reference. According to Kotler, they reflect four different approaches to the growth of the company and are associated with a change in the state of one or more of the following elements: product, market, industry, position of the company within the industry, technology. Each of these five elements can be in one of two states: an existing state or a new state.

The first group of benchmark strategies are the so-called concentrated growth strategies. This includes those strategies that are related to product and market change and do not affect the other three elements. In the case of following these strategies, the company is trying to improve its product or start producing a new one, while not changing the industry, as for the market, the company is looking for opportunities to improve its position in the existing market or move to a new market.

The second group of reference strategies are those business strategies that involve the expansion of the firm by adding new structures. These strategies are called integrated growth strategies. Usually, a firm can resort to implementing such strategies if it is in a strong business, cannot implement concentrated growth strategies, and at the same time, integrated growth does not contradict its long-term goals. A firm can pursue integrated growth, both through acquisition of ownership and through expansion from within. In both cases, there is a change in the position of the firm within the industry.

The third group of reference business development strategies are diversified growth strategies. These strategies are implemented if firms can no longer develop in a given market with a given product within a given industry.

The fourth type of reference business development strategies are reduction strategies. These strategies are implemented when the company needs to regroup forces after a long period of growth or due to the need to increase efficiency, when recessions and fundamental changes in the economy are observed, such as, for example, structural adjustment, etc. In these cases, firms resort to targeted and planned downsizing strategies. The implementation of these strategies is often not painless for the company. However, it must be clearly understood that these are the same strategies for the development of the company as the growth strategies discussed, and under certain circumstances they cannot be avoided. Moreover, in certain circumstances, these are the only possible strategies for business renewal, since in the vast majority of cases, renewal and general acceleration are mutually exclusive business development processes.


1.3 Classification of strategies


The variety of strategies used in strategic management makes it very difficult to classify them. Among the classification features, the most significant are the following:

· decision-making level;

· the basic concept of achieving competitive advantages;

· industry life cycle stage;

· the relative strength of the organization's industry position;

· the degree of "aggressiveness" of the organization's behavior in the competition.

For example, the classification of enterprise strategies according to the level of decision making is as follows:

corporate;

business;

functional;

· operational (the latter can be included in the functional).

A complicating factor in the classification of strategies is that most strategies cannot be uniquely identified by one of the features. So, Zabelin P.V. and Moiseeva N.K. They propose to classify strategies in only three ways:

· belonging to the five fundamental strategies for achieving competitive advantages (global strategies);

· belonging to the strategies of portfolio management of business areas (portfolio strategies);

· belonging to strategies applied depending on external and internal conditions (functional).


2. The essence of the diversification strategy


The answer to the question: “What kind of business should we go into?” is the starting point of the strategy and the foundation of the firm's identity. Many companies use the mission statement as a means to openly state their identity. Over time, a company's understanding of the scope of its business may change. Corporate strategic decisions can be the foundation by which a company is able to overcome the limitations of the industry life cycle and achieve long-term growth and prosperity. On the other hand, misunderstood corporate strategies can destroy jobs and invested capital at an alarming rate.

Thus, when making diversification decisions, firms answer questions such as:

How attractive is the industry to enter?

Can the firm establish a competitive advantage in a new industry?


2.1 Management levels


Diversification (from Latin Diversificatio - change, diversity) is the expansion of economic activity into new areas (expansion of the range of manufactured products, types of services provided, geographical scope of activity, etc.). In the narrow sense of the word, diversification refers to the penetration of enterprises into industries that do not have a direct industrial connection or functional dependence on their main activity. As a result of diversification, enterprises turn into complex diversified complexes, or conglomerates.

The strategy is needed by the company as a whole, each line of activity within it and each functional unit of each direction.

In diversified enterprises, strategies are formed at four separate organizational levels. The first level - corporate - is present in companies operating in several business areas. Here decisions are made on purchases, sales, liquidations, re-profiling of certain business areas, strategic correspondences between individual business areas are calculated, diversification plans are developed, and global management of financial resources is carried out. Corporate strategy is a general management plan for a diversified enterprise and applies to the entire enterprise, covering all areas of activity in which it is engaged. It consists of actions taken to assert one's position in various industries.

Corporate strategy is created by top managers. They have the primary responsibility for reviewing messages and recommendations from lower-level managers. Heads of key industries can also participate in the development of a strategy if its individual areas are relevant to the production they lead.

The second level - business areas - the level of the first leaders of non-diversified organizations, or completely independent, responsible for developing and implementing the strategy of the business area. At this level, a strategy is developed and implemented based on the corporate strategic plan, the main goal of which is to increase the competitiveness of the organization and its competitive potential.

Business strategy (business strategy) denotes a management plan for a particular area of ​​the enterprise and includes a number of approaches and directions developed by management in order to achieve the best performance in a particular area of ​​activity. For an individual enterprise engaged in one type of business, corporate and business strategies are the same; the difference between these strategies exists only in a diversified enterprise. Directions of business strategy:

-response to changes taking place in the industry, in the economy as a whole, in politics and other significant areas;

-development of competitive measures and actions, market approaches that can give a lasting advantage over competitors;

-consolidation of strategic initiatives functional departments;

-solving specific strategic problems that are relevant at the moment.

The third - functional - level of heads of functional areas: finance, marketing, R&D, production, personnel management, etc. Functional strategy - a management plan of action for a separate division or a key functional area within a particular business area. The functional strategy, although narrower than the business strategy, specifies the individual details in the overall development plan of the enterprise by identifying approaches, necessary actions and practical steps to ensure the management of individual business units or functions.

The fourth - linear - the level of heads of departments of the organization or its geographically remote parts, for example, representative offices, branches. Operational strategy is a management plan for key organizational units. It provides for the implementation of strategically important operational tasks, such as: the purchase of raw materials, transportation, and promotional activities. Responsibility for developing operational strategies lies with middle and lower level managers.

An undiversified organization has, respectively, three levels of strategies. This continues until attempts to diversify into other areas are taken into account.

Thus, development strategy development is carried out at all levels of management. This increases its efficiency and the efficiency of the enterprise as a whole.


2.2 Reasons for diversification


Diversification is based on three main goals: growth, risk reduction and profitability.

Height. In firms in end-of-life industries, the reluctance of managers to downsize the firm makes firm diversification particularly attractive. The tendency of managers to seek growth at the expense of profits is one aspect of the agency problem (heavy bonuses paid to CEOs force them to manipulate financial statements rather than aim for long-term profitability).

The ability of top managers to pursue goals other than profitability is limited by two main factors. First, over a long period, the firm must generate a return on invested capital in excess of the costs incurred, otherwise it will not be able to raise the capital needed to replace assets. Second, if managers sacrifice profitability for other purposes, they risk losing their jobs, either through shareholder protests or as a result of their firm being taken over by another. This explains why companies sell their diversified businesses when their independence is threatened by a controlling bid or a drop in profitability that attracts potential predators.

Risk reduction. The second motive for diversification is the desire to distribute risk. To isolate the impact of diversification on risk, it is very useful to take into account "pure" or "conglomerate" diversification, in which individual businesses are owned by the same owner, but because they are not related to each other, their individual cash flows remain unchanged. While cash flows various businesses are not fully correlated, the differences between the cash flows of the combined businesses are smaller than the average of the differences in cash flows between the individual businesses. Thus, diversification reduces risk.

Profitability. For firms considering diversification, Michael Porter suggests three "vital tests" to consider when deciding whether to create shareholder value through diversification:

1.Industry Attractiveness Test. The industries chosen for diversification must be structurally attractive or have the ability to become so.

2.Test for entry costs. The cost of organizing a new production should not absorb all future profits.

.Wealth Increment Test. Either the new business unit must gain a competitive advantage through its association with the corporation, or the corporation through its association with the business unit.


2.3 Applications of the diversification strategy


Consider the scope of the diversification strategy.

Diversification strategies are one of the most common business development strategies. These strategies are implemented when the firm can no longer develop in a given market with a given product within a given industry. The main factors determining the choice of a diversified growth strategy are formulated:

?markets for the business being carried out are in a state of saturation or a decrease in demand for the product due to the fact that the product is at the stage of dying;

?the current business gives an inflow of money that exceeds the needs, which can be profitably invested in other areas of the business;

?new business can create synergies, for example through better use of equipment, components, raw materials, etc.;

?antitrust regulation does not allow further expansion of business within the industry;

?tax losses can be reduced;

?access to world markets can be facilitated;

?new qualified employees can be attracted or the potential of existing managers can be better used.


3. Types of Diversified Growth Strategies


Types of diversification in economic activity can be classified in two directions: diversification of the investment portfolio and diversification of business areas (activity and production). This paper discusses the diversification of activities and production.

Vikhansky named the following as the main strategies for diversified growth:

2)centered diversification strategy;

3)horizontal diversification strategy;

)conglomerate diversification strategy.

Soitina-Kutishcheva Yu.N. offers a classification of types of diversification according to three criteria: direction, industry affiliation, country affiliation. The classification is clearly shown in Figure 1.


Figure 1 - Classification of types of diversification


The following types of diversification in its direction have been identified:

vertical diversification. It provides for the development of new products, for the production of which traditional products are used as raw materials or semi-finished products, or the production of goods that are raw materials or semi-finished products that are components in the manufacture of traditional products. This type of diversification is associated with the creation of technological chains "extraction and processing of raw materials - production of an intermediate product - production of a product with high consumer properties - marketing" both in full and in an abridged version with the absence of any links;

horizontal diversification. In this case, a new product is created on the basis of existing or new technologies within the main profile of the company, product distribution channels are expanding;

conglomerate diversification. In this case, the growth of the company is carried out through the production of products that are completely unrelated to its traditional products;

cross diversification. Manifested in a combination of horizontal and vertical diversification;

mixed diversification. Manifested in a combination of horizontal, vertical, conglomerate diversification.

By industry, we suggest highlighting:

?mono-industry diversification - diversification of the company within one industry;

?polysectoral - related diversification - diversification within several industries associated with traditional types of products;

?multi-industry - unrelated diversification - diversification within several industries, not related to traditional types of products.

A.A. Thompson, Jr. A.J. Strickland distinguishes the following types of diversification strategies:

1.The strategy of centered (concentric) diversification is based on the search for and use of additional opportunities for the production of new products that are contained in the existing business. That is, the existing production remains at the center of the business, and the new one arises based on the opportunities that are contained in the developed market, the technology used, or in other strengths of the firm's functioning. Such capabilities, for example, may be the capabilities of the specialized distribution system used;

2.Horizontal diversification strategy focused on the traditional consumer. In this case, a new product is created that requires new technologies, which is focused on the consumer of the main product.

3.Vertical diversification strategy (development of new products, using traditional products as raw materials or semi-finished products, or production of goods that are raw materials, semi-finished products or components in the manufacture of traditional products. This type of diversification is not always distinguished.)

.The strategy of conglomerate or lateral diversification. In this case, the growth of the firm is carried out by producing products that are completely unrelated to the traditional products of the firm.

Taking into account the modern globalization of the world economy, it is considered natural to diversify the organization both within one country and outside it, which is reflected in the allocation of types of diversification by country.

Common goals for all areas of diversification are: the ability to consolidate investment resources; reducing the risks of uncertainty in the external environment; the desire to ensure social and economic stability, survivability, crisis prevention, preserve regional sectoral complexes; better use of all types of resources; obtaining a synergistic effect due to the growth of market potential; reduction of transaction costs; personal motives of managers; improving the business image.

Goals specific to vertical diversification: securing raw material sources; desire to get strategic advantages in sales or supply, to achieve stability and consistency of relations; reduction of risks of non-sale of products, non-delivery of raw materials; reducing the need for working capital; preservation of unique technological complexes.

Goals characteristic of horizontal diversification: protection from competition, increase in market share, reduction of costs for development, production and promotion of products; the ability to switch to a product that is in demand; combining complementary resources, using surplus fixed assets; increase in loading of industrial systems; alternative options for the use of raw materials, materials, technologies.

Goals specific to conglomerate diversification: the ability to switch to a commodity that is in demand; the possibility of reducing the need for working capital, the transition to internal settlement; alternative options for the use of raw materials, materials, technologies.

Thus, after analyzing the works of the above authors, we can conclude that most of the authors are similar in the classification of the diversification strategy. Mainly horizontal, vertical and conglomerate strategies of diversification stand out. Some authors add mixed, cross, concentric differentiations to the classification. Diversification is also considered depending on industry and country affiliation.

The main strategies for diversified growth are as follows:

the strategy of centered diversification is based on finding and using additional opportunities for the production of new products that are contained in the existing business. That is, the existing production remains at the center of the business, and the new one arises based on the opportunities that are contained in the developed market, the technology used, or in other strengths of the firm's functioning. Such capabilities, for example, may be the capabilities of the specialized distribution system used.

a horizontal diversification strategy involves looking for growth opportunities in an existing market through new products that require a new technology that is different from the one being used. With this strategy, the firm should focus on the production of such technologically unrelated products that would use the already existing capabilities of the firm, for example, in the field of supply. Since the new product must be oriented to the consumer of the main product, it must be related in its qualities to the already produced product.

An important condition for the implementation of this strategy is a preliminary assessment by the company of its own competence in the production of a new product.

conglomerate diversification strategy is that the firm expands by producing technologically unrelated new products that are sold in new markets. This is one of the most difficult development strategies to implement, since its successful implementation depends on many factors, in particular, on the competence of the existing staff and especially managers, seasonality in the life of the market, the availability of the necessary amounts of money, etc.

As a result, we can conclude that in real practice, a firm can simultaneously implement several strategies. This is especially true for multi-industry companies. The firm can also pursue a certain sequence in the implementation of strategies. In such cases, the firm is said to be pursuing a combined strategy.

Diversification can be concentric or conglomerate:

Concentric diversification occurs when an enterprise acquires another enterprise that produces products similar to existing ones. Enterprises wishing to diversify concentrically by external means will look for organizations that are strongly associated with it in terms of market, technology and resource requirements. However, there is a possibility here that existing weaknesses or previous weak solutions can be hidden. The financial benefits of concentric diversification usually appear over the medium to long term. There is a good opportunity for financial synergy here, ie. when the total result is greater than the sum of the results from two certain types activities.

Conglomerate diversification occurs when an enterprise acquires another enterprise that produces products that have no connection with existing products and markets (for example, a firm that develops computer programs). Conglomerate diversification can provide significant financial synergies - in the form of tax incentives, greater opportunities for employee training, better use of financial resources.

This strategy is generally regarded as having a significant level of risk, as the enterprise may have little experience in new technology or new markets and may not have the managerial skills to effectively lead the new enterprise. Directions in which diversification can occur in the field of markets and technology.

The advantages of conglomerate diversification are that it can help the enterprise survive for an extended period of time; provides the enterprise with the opportunity to expand the range of products (services); can provide financial synergy; can serve as an efficient use of excess resources.

The disadvantages of conglomerate diversification is that diversification on a large scale is necessary for success; workers may not have sufficient knowledge and experience to effectively manage the production of a new product; significant investment in new technology may be required; this is an incremental strategy - it takes a certain amount of time to make a profit.


4. Advantages and disadvantages of a diversification strategy


External strategies are usually implemented through acquisitions, mergers, formation joint ventures or associations with enterprises located at the beginning or end of the value chain of this enterprise. This chain covers processes from raw material suppliers to end users.

External growth may include activities that are directly related or even not related to existing technologies, markets. The main challenges behind these various firms are to increase market share and to achieve financial synergies.

Diversification in general can be called an expansion of the existing scale of the enterprise in terms of product and market. It should be noted that diversification and acquisition are not synonymous. Acquisition may not lead to diversification, but diversification may be achieved through internal development.

The enterprise can diversify internally by creating products / services that are technologically similar to those available; by creating products / services that are completely different from existing ones, but which can attract existing buyers.

The reasons for the transition of the enterprise to internal diversification can be different:

1)new products may have cyclical sales patterns that balance the cyclical sales of existing products of the enterprise;

2)existing distribution channels of the enterprise can also be used to sell new products to existing customers;

)by adding new products to existing products, resulting in increased profits;

)diversification may be necessary due to the fact that the company operates in a highly competitive and not growing industry (for example, in the bakery), resulting in low level arrived.

The reasons why a company considers it necessary to diversify externally may be the following:

?existing products and markets no longer meet the challenges of enterprise growth and profitability;

?the need to balance a highly leveraged enterprise with a non-leveraged enterprise so that the capital structure is more balanced;

?the need to obtain resources that significantly improve the performance of an existing enterprise;

?the desire to distribute risk and balance the range of goods / services of the enterprise;

?the need for efficient use of available funds.

The advantages of diversification as a means of external growth is that it can be a good way out in a declining industry; it is a profit-oriented strategy; it helps to reduce dependency of scale and synergy; can significantly increase the bargaining power of the enterprise in relation to buyers; can significantly increase the creditworthiness of the enterprise; can help distribute possible risk.

The disadvantages of diversification as a means of external growth are as follows:

1)a new activity may require new skills that are not available in the existing enterprise (for example, technological skills);

2)this strategy is more suitable for large enterprises;

)there may be uncertainty in the managerial aspect of diversification (for example, how two management teams will collaborate with each other);

)it is a high-risk strategy with long-term returns;

)requires significant reserves Money;

)there may be a tendency to transfer deficiencies from an existing enterprise to a new one.

Thus, the diversification strategy has a number of advantages over other strategies. First, this strategy can help an enterprise survive in a competitive market for its core business by shifting part of its assets to other enterprises. Secondly, the strategy can help to profitably invest excess resources in their own enterprise.

The disadvantages of this strategy is the problematic managerial aspect of diversified enterprises. It is also worth remembering that the implementation of this strategy is carried out in the long term, so this will require additional costs from the company, which can pay off in the future. It also has the disadvantage that the diversification strategy may require new skills that the employees of the main enterprise do not possess.


Conclusion


Diversification can be justified either by the excellent post-industry profit potential that can be gained by entering the industry, or by the firm's ability to gain a competitive advantage in a new industry.

This term paper was to form the basis for making corporate strategic decisions that create, rather than destroy, company value. We have set a number of tasks to achieve this goal.

In the first chapter, the theoretical foundations of the strategic development of the enterprise were considered. The basic concepts of strategy, reference development strategies, and classification of strategies were given.

In the second chapter, the essence and types of the diversification strategy were revealed, as well as the grounds for its application, the scope of the diversification strategy.

Considering the diversification strategy, the main concepts related to this issue were defined, the classifications of various authors were considered.

We have analyzed a number of works by both Russian and foreign authors on marketing and strategic planning. From which we can conclude that most authors are similar in the classification of diversification strategies. Mainly horizontal, vertical and conglomerate strategies of diversification stand out. Some authors add mixed, cross, concentric differentiations to the classification. Diversification is also considered depending on industry and country affiliation.

In the course of the study, the areas of application of the diversification strategy were considered. We have found that the diversification strategy is one of the most common business development strategies. These strategies are implemented when the firm can no longer develop in a given market with a given product within a given industry. As a result, the main factors determining the choice of a diversified growth strategy were formulated.

It was revealed that the main strategies for diversified growth are the strategy of centered diversification based on the search and use of additional opportunities for the production of new products that are contained in the existing business; a horizontal diversification strategy that involves looking for growth opportunities in an existing market through new products that require a new technology that is different from the one used., as well as a conglomerate diversification strategy that consists in the fact that the company expands through the production of new products that are technologically unrelated to already produced new products that are sold in new markets.

Thus, in conclusion, it can be noted that each company chooses a more convenient type of strategy for itself, based on its goals and depending on the desired result. For some, this may be a strategy of one business, for others - one of the diversification strategies. The main thing is the achievement of effective activity, its profitability and achievement of the set goals and objectives.


Bibliographic list


1.Arsenova M.V., Strizhenko A.A. An organizational approach to strategy in the information age #"justify">. Bakirova G.F. Psychology of effective strategic personnel management: textbook. manual for university students studying in the specialties "Psychology", "Organization Management", "Personnel Management" / G.Kh. Bakirov. - M.: UNITI-DANA, 2008. - 591 p. - (Series "Magister");

3.Vikhansky O.S. Strategic Management: Textbook. - 2nd ed., revised. and additional - M.: Economist, 2004.;

.Grant R.M. Modern strategic analysis. 5th ed. / Per. from English. ed. V.N. Pound. - St. Petersburg: Peter, 2008. - 560 p.: ill. - (Series "Classic MBA");

.Daft R. Secrets of organizational success / R. Daft. - M.: Olma-press, 2007. - 569 p.;

.Business Planning: Textbook / Ed. V.M. Popov. - M.: Finance and statistics. - 2007.;

.Dimitrieva Z.M. School of Management. The book of a practicing leader and business coach. - St. Petersburg: Speech, 2008. - 234 p.;

8.Ivanov M.A., Shusterman D.M. Organization as your tool: Russian mentality and business practice. - M., 2003.;

.Korotkov E.M. Crisis Management, Publishing House "INFRA-M", 2007;

10.Kotler F. 300 Key Marketing Questions: answered by Philip Kotler / F. Kotler; per. from English. O. Litvinova. - M.: Olimp-Business, 2006. - 224 p.;

.Lisichkin V.A., Lisichkina M.V. Strategic management: Educational and methodical complex. - M.: Ed. center EAOI.2007. - 329 p.;

.Maslova T.D. Marketing / Etc. Maslova, S.G. Bozhuk, L.N. Kovalik. - 3rd ed., revised. and additional - St. Petersburg: Peter, 2008. - 384 p.: ill.;

.Parakhina V.N. Strategic management: a textbook for students. universities. / V.N. Parakhina, L.S. Maksimenko, S.V. Panasenko. - 4th ed., stereotype. - M.: KNORUS, 2008. - 496 p.;

14.Porter E. Michael Competitive strategy: A methodology for analyzing industries and competitors / Michael E. Porter; per. from English. - M.: Alpina Business Books, 2005. - 454 p.;

.Soitina-Kutishcheva Yu.N. Integration and diversification as ways to improve the sustainability of the enterprise / Yu.N. Soitina - Kutishcheva // Anti-crisis management: production and territorial aspects: tr. IV All-Russian. scientific - pract. conf. - Novokuznetsk 2005. - S. 107-111 .;

16.Solovieva Yu.N. Interaction marketing / Yu.N. Solovyov. - SPb.: Publishing House of SPbGUEiF, 2001. - 84 p.

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The third group of reference business development strategies are diversified growth strategies. These strategies are implemented if firms can no longer develop in a given market with a given product within a given industry.

The main factors determining the choice of a diversified growth strategy are formulated:

· the markets for the ongoing business are in a state of saturation or a decrease in demand for the product due to the fact that the product is at the stage of dying;

· the current business gives the receipt of money exceeding the needs, which can be profitably invested in other areas of the business;

· a new business can generate synergies, for example, through better use of equipment, components, raw materials, etc.;

· antimonopoly regulation does not allow further expansion of business within the industry;

tax losses can be reduced;

· access to world markets can be facilitated;

• new qualified employees can be attracted or the potential of existing managers can be better used.

These types of strategies are:

· The strategy of centered diversification is based on the search for and use of additional opportunities for the production of new products, which are concluded in the existing business. That is, the existing production remains at the center of the business, and the new one arises based on the opportunities that are contained in the developed market, the technology used, or in other strengths of the firm's functioning.

Such capabilities, for example, may be the capabilities of the specialized distribution system used;

Business example:

The hotel chain "Hilton" is widely known in the world for its upscale hotels located in the central areas of large cities. Huge conference and banquet halls, large halls, porters in liveries, etc. are those features of the Hilton hotels that allow them to be classified as luxurious.

The management of the Hilton network has never shown interest in the construction and operation of inexpensive "middle-class" hotels, which have a prefix to their name "business hotel" (hotel for businessmen) or "Inn" (inn).

The management's commitment to preserving the image of expensive and upscale hotels for Hilton hotels has led to the fact that the growth of hotel space has practically stopped. This was due to the fact that the market for this class of hotel services turned out to be saturated and did not expand. In order to overcome the current impasse and expand the amount of hotel space (by the end of this millennium, it is planned to increase the area by 50%), the management decided to start building 100 low-cost hotels for mid-level businessmen, as well as for family living. New hotels should be located in the suburbs of big cities, which is usual for hotels of this class. The cost of a room in a hotel of the new Hilton Garden Inn chain will be in the range of 50-80 dollars. competitive advantages due to a relatively high level of customer service. In particular, each room will have a telefax and a printer. In addition, each room will have a kitchen with a microwave.

· Horizontal diversification strategy involves looking for growth opportunities in an existing market through new products that require a new technology that is different from the one used. With this strategy, the firm should focus on the production of such technologically unrelated products that would use the already existing capabilities of the firm, for example, in the field of supply. Since the new product must be oriented to the consumer of the main product, it must be related in its qualities to the already produced product. An important condition for the implementation of this strategy is a preliminary assessment by the company of its own competence in the production of a new product;

Business example:

The main supplier of raw materials for the domestic tire industry (35% of all tire production is carried out from this raw material), FPG Neftekhimprom bought a controlling stake in the Ukrainian enterprise Dneproshyn. This purchase marked the entry of FPG "Neftekhimprom" into a new business for it - tire production. Prior to this, the group included enterprises engaged only in chemical production (processing of primary raw materials and production of chemical materials): Orgsintez, Novokuibyshev petrochemical plant, Synthesis rubber, Khimvolokno, Nipromteks. In addition to oil refining and the creation of synthetic materials, FPG "Neftekhimprom" sold tires produced from its raw materials on its order through its own distribution network. In the future, Neftekhimprom intends to expand the tire business by including small, local tire factories in the group.

· the strategy of conglomerative diversification is that the company expands through the production of technologically unrelated new products that are sold in new markets. This is one of the most difficult development strategies to implement, since its successful implementation depends on many factors, in particular, on the competence of the existing staff and especially managers, seasonality in the life of the market, the availability of the necessary amounts of money, etc.

Business example:

In the view of many, a company that produces a Mercedes car should be an exceptionally successful company. For a long time, this idea of ​​​​the Daimler-Benz concern was not in doubt. However, the beginning of 1996 was marked by a sensation. The head of the Daimler-Benz concern announced that the concern's losses in 1995 amounted to several billion dollars and that major restructuring within the concern was coming.

Created in 1926, the automobile concern "Daimler-Benz" in the mid-80s. headed for a sharp expansion due to the diversification of its activities. The original idea was to turn Daimler-Benz into a diversified technology concern. Aircraft manufacturing was chosen as the main area for the expansion of the concern. In 1985, Daimler-Benz acquired Motor und Turbinen Union, a manufacturer of aircraft engines. In the same year, he acquired a controlling stake in the Dornier aircraft manufacturing company, which he bought out in full in 1988. Along with entering the aircraft industry, Daimler-Benz also entered the electrical industry. In 1985, the concern acquired a 25% stake in the electrical engineering company AEG. In 1986, he increased his stake in AEG to 56%, and in 1988 to 80%.

The diversification of production activities required a structural transformation of the concern. In 1989, the Daimler-Benz concern was transformed into a holding company that united four divisions; the automotive division of Mercedes-Benz, the aircraft division of Deutsche Aerospace (abbreviated as Dasa), the electrical division of AEG and the division of Daimler-Benz Inter-Services.

The Daimler-Benz development program did not end there. The course towards the globalization of activities led to the fact that in 1993 the concern's shares were included in the listing of the New York Stock Exchange.

In an effort to expand its presence in the aerospace business, Dasa began negotiations in 1990 with the Dutch aircraft manufacturer Fokker to acquire its shares. The negotiations began in a year when Fokker was making very high profits. These negotiations ended with the acquisition by Das in 1993 of a 51% stake in Fokker. However, immediately on next year Fokker suffered huge losses. Dasa, trying to save the catastrophic situation, invested over $600 million in Fokker. But in 1995, Fokker again suffered losses. Daimler-Benz decided that it was no longer possible to provide assistance to the Fokker company. This meant leaving it and losing billions. In parallel, Daimler-Benz also decided to part with a controlling stake in Dornier.

However, the losses associated with the activities of the aerospace department of Das were not the only ones for Daimler-Benz. Loss-making activity in the turboprop and jet aircraft market was quite explainable by the drop in demand for these products due to the end of the Cold War. But "Daimler-Benz" suffered significant losses from the activities of the electrical department of "AEG". This forced the concern to terminate the independent existence of this branch. In fact, this meant that, having suffered huge losses, Daimler-Benz took a course to leave those industries in which it was not originally and in which it had entered, seeking to make effective investments of capital created in its basic field of activity - the automotive industry. .

The third group of basic or reference strategies includes diversification growth strategies. This type of strategic plans is implemented when the company can no longer effectively develop in this market with this product within the industry. This term is often associated with expansion into an area that is not related to the current activities of the organization. Such a strategy, which requires large investments for its implementation, can usually be carried out only by large organizations. The main strategies for diversifying growth are as follows:

  • 1. The strategy of centered diversification is based on the search for and use of additional opportunities for the production of new products that are included in the existing production and economic activities. That is, the existing production remains at the center of economic activity, and the new one arises based on the opportunities that are contained in the developed market, the technology used, or in other strongest aspects of the company's functioning, for example, the capabilities of the specialized distribution and implementation system used can be connected.
  • 2. The horizontal diversification strategy involves looking for growth opportunities in an existing market through new products that require a new technology that is different from the one used. When implementing this type of strategy, the firm should focus on the production of such technologically unrelated products, for example, in the field of supply. Since the new product must be related to the already produced product, then in terms of its qualities it must be related to the already manufactured product. An important condition for the implementation of this strategy is a preliminary assessment by the company of its own competence in the production of new products.
  • 3. The strategy of conglomerate diversification is that the organization expands through the production of new, technologically unrelated to those already produced, products that are sold in new markets. This is one of the most difficult strategies for the development of an enterprise, since its successful implementation depends on a large number of different factors, in particular, on the competence of personnel and, in particular, management specialists, seasonality in the life of the market, and the availability of the necessary amounts of financial resources.

In practice, a firm can simultaneously implement several strategies. This is especially true for multi-industry companies. The firm can also produce a certain sequence in the implementation of strategies. When choosing a specific strategy, the following key factors should be considered.

The strengths of the industry and the strengths of the firm can often play a decisive role in choosing a firm's growth strategy. Leading firms, depending on the state of the industry, must choose different growth strategies. So, for example, if the industry is declining, then one should bet on diversification strategies, but if the industry is booming, then the choice of growth strategy should fall on the strategy of concentrated or integrated growth.

Weak firms, in turn, should choose those strategies that can improve their position within the existing industry. If there are no such strategies, then they should leave the industry, that is, choose a reduction strategy.

Other factors that determine the choice of a particular strategy include the interests and attitudes of top management to risk, to certain markets, products, competitors, etc.; financial resources of the firm; qualification of employees; commitments under previous strategies; the degree of dependence on the external environment; time factor. The development of the business activity of a firm (enterprise) is determined by the following circumstances: in which market it operates, i.e. whether the market is established or new to it, and what product or services it enters the market with (products that are new to the market or not). The practice of market relations has developed several basic directions that form the activity of the behavior of firms.

  • 1. Expansion of the activity of the firm (enterprise) "deep", i.e. segmentation of existing markets in order to capture new consumer groups with their products.
  • 2. Expansion of the activity of the firm (enterprise) "in breadth", i.e. diversification of production through the release of new types of goods (products) both related to the main profile of the enterprise and not related to it.
  • 3. Expansion of the activity of the company "quantitatively" - the growth of sales volumes by increasing the volume of production of an unchanged range of goods for the existing market.
  • 4. Expansion of the activity of the firm "across the borders", i.e. Ensuring the increase in output by entering new markets.

As a rule, these strategies are presented in the form of a matrix built depending on the product and the market (Table 1).

Table 1 Matrix of basic strategies

Field A1 is characterized by a deep penetration strategy ("old" product - "old" market). This strategy is successful when the market is not yet saturated. A firm can achieve a competitive advantage by reducing production costs and selling prices of services.

As for the field A2, it is characterized by a market expansion strategy ("old" product - "new" market). When using this strategy, the company tries to increase the volume of sales of its goods (services) in new markets or in new segments of the existing market.

The product development strategy ("new" product - "old" market) is typical for positioning in field B1. This strategy is effective in creating new product modifications for existing markets. Field B2 is characterized by the presence of a diversification strategy ("new" product - "new" market). This strategy is used to eliminate the firm's dependence on the production of a particular product (service) or on a particular market.

The basic growth strategies of the firm predetermine the main types of strategies of strategic business units, of which three main types can be distinguished.

  • 1. Offensive strategy (attacking) -- a strategy for gaining and expanding market share.
  • 2. Defense strategy -- a strategy to retain the existing market share.
  • 3. Retreat strategy - a strategy to reduce market share in order to increase profits as a result of a gradual exit from the market or liquidation of this business.

The use of a particular type of strategy by a firm is determined by the position of the firm in the market, which is characterized by its market share (as a percentage). Depending on the market share, the following provisions of the company and its strategy are distinguished:

  • 1. The leader (market share - 40%) feels confident, the first to take the initiative in the field of prices for new products. In defense, the leader resorts to various actions:
    • * "defense position" - the leader creates barriers (price, licensing) on ​​the main directions of competitors' attacks;
    • * "flank defense" - the leader identifies key zones, advanced fortified points for both active defense and counterattack;
    • * "preemptive defense" - the leader organizes ahead of the opponent using special signals that neutralize the attack, for example, disseminates information about the upcoming price cuts;
    • * "counterattack" - after the offensive, the leader pauses, and then hits the competitor's weak point, for example, shows the reliability of his product and the unreliable components of the competitor's products;
    • * "mobile defense" - the leader expands its impact through the diversity of production, identifying the deep needs of customers;
    • * "compressive defense" - the leader leaves the weakened market segments while strengthening the most promising ones.
  • 2. The contender for leadership (market share - 30%) feels confident only if he attacks first. Various types of attacks are possible:
    • * "frontal attack" is conducted in many areas (new products and prices, advertising and sales), requires significant resources;
    • * "environment" - an attempt to attack all or a significant share of the leader's market territory;
    • * "bypass" - the transition to the production of fundamentally new goods, the development of new markets or the implementation of a leap in technology;
    • * "guerrilla attack" - small impetuous attacks by not entirely correct methods to demoralize the opponent.
  • 3. Follower or follower (market share - 20%) - this role is to follow the leader at a considerable distance, saving effort and money.
  • 4. Newcomer, "entrenched" in a market niche (market share - 10%) - beginners begin with this role. This is a search for a market "niche" of sufficiently satisfactory size and profitability. Growth strategies can be implemented through:
    • * expanding the sales volume of products in order to more fully the potential of the market;
    • * an exit with new products on already mastered markets;
    • * exit with already produced products to new, not yet mastered markets;
    • * diversification;
    • * Acquisition of new enterprises;
    • * entering new markets with new products.

It should be noted that the least risky is the expansion of sales of already produced goods. Then comes the entry with new products to old markets and the entry of old products into new markets. The most risky is the entry of new products into a new market.

strategy diversification behavior