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What is Related Diversification?

 
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Related diversification is one of the two variants of diversification strategy. When making related diversification, companies expand their operations beyond current markets and products, but are still operating within existing capabilities or within the existing value network.

When expanding into different products or markets using existing capabilities, companies can create related diversification by using its capabilities and resources in other settings. A car manufacturer might for instance expand its operations into manufacturing of motorcycles or trucks, and use its capabilities and resources to become successful in these markets.

Likewise, a company might create related diversification by integrating into the existing value network. For instance, companies producing steel might go into the mining business, where it might control the supplies etc. for its main operations. Likewise, clothes manufacturers might create their own brand shops, in which they sell their clothes.

Above we see some examples of related diversification, which might give the companies the advantages of a diversification strategy.

 
 
 
 
 
Date Created: 2010-12-11
Posted by: Admin
 
 
 

Related resources:

What is Michael Porter's 5 forces?
Internationalization of Multinational Corporations
Global strategies for MNCs: Christopher A. Bartlett & Sumantra Ghoshal
What is the Balanced Scorecard?
What is the BCG Matrix?
What is a SWOT analysis?
What is Michael Porter's Diamond Model?
Reference(s)
 
Exploring Coorporate Strategy
Johnson, Gerry. Scholes, Kevin Richard Whittington: (2006); Prentice Hall
Keywords:
Online MBA, Online MBA Courses, Related diversification, vertical integration, horizontal integration, backward integration, forward integration, value network, capabilities, resources

 


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