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When does external diversification take place in a company?
External diversification takes place when a company looks external of its current operations and buys access to new marketplaces or products. Mergers are one general way of external diversification. Mergers take place when two or more firms merge operations to form one company, perhaps with a new name.
Which is the best definition of diversification strategy?
Diversification strategy involves expanding organization’s operations by adding markets, services or product to the existing business. The main aim of diversification is to allow the firm to enter lines of business that are different from existing line of business.
When is diversification good and when is it bad?
There is diversification when a company embarks itself in the production of goods so much different from the previous ones to bring changes in schedules and distribution" [ 1] . The traditional economic theory teaches us that diversification is good and positive both in terms of efficiency and risk management.
When does diversification take place in a conglomerate?
If the new venture is related to the existing lines of business, then it is called concentric diversification. On the other hand conglomerate diversification takes place when there is no common line of strategic relationship between the fresh and old lines of business.
Last Update: Oct 2021
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