UNRELATED PRODUCT DIVERSIFICATION1
Student-1 MK
ECN-600: Competitive Advantage in the Global Economy
Unrelated Product Diversification
The strategy of unrelated product diversification or conglomeration is a unique way of business expansion and operates in a diversified area to earn huge profits. It is important for the business firms to evaluate the business environment of both developed and emerging economics before adopting the strategy of unrelated product diversification (Peng, 2014). In addition to this, in the emerging economies, this strategy has been proven valuable and adds value in the business operations because of increasing abilities of the firm to sustain the off seasons as well.
In addition to this, the emerging economies will also decrease overtime due to having several disadvantages of unrelated product diversification. It is because it requires a high level of experience and management skills to manage the economic slowdown in different industries. In emerging economies, high interest of business firms will reduce the capabilities of the conglomerate firms to approach the customers (Chakrabarty, 2015). Just like developed countries, it is really difficult for the business firm in emerging economies to boost the performances of conglomerate companies like the individual product company (Peng, 2014).
Unrelated product diversification always requires additional efforts and attention to complete the business operations and effectively implement the business strategies. It takes lots of time and maximizes the cost of strategy implementation. However the successful and adequate implementation increases profits, but due to high cost, the profitability would be less comparatively efforts (Tianjiao, 2014). At the same time, if the company would fail to allocate significant financial and human resources for the unrelated product diversification, it will negatively affect the culture and the performances of the firm. Apart from this, the level of conflict and job dissatisfaction will increase. All of these reasons will decrease the interest of emerging economies over time in conglomeration (Peng, 2014).
References
Chakrabarty, S. (2015). The Influence of Unrelated and Related Diversification on Fraudulent Reporting. Journal of Business Ethics, 131 (4), 815-832.
Peng, M. (2014). Global strategy (3rd edition). Mason, OH: Cengage Learning.
Tianjiao, Q. (2014). Product Diversification and Market Value of Large International Firms: A Macroenvironmental Perspective. Journal of International Marketing. 22 (4), 86-107.
Student-2 MA
Unrelated Product Diversification
The strategy of unrelated product diversification is a process of expanding business by introducing new products in the different industry. For example, if an electronic firm enters into pharmaceutical industry by launching a new Medicaid product, it will be an unrelated diversification (Peng, 2014). However, it is a good strategy to reach untouched segments and increase profitability of the firm, but several risks are associated with the unrelated diversification strategy. Nowadays, this strategy is considered a value added action of the firm in the emerging economies. It is because it increases capabilities of the firm to survive in the off season as well (Chakrabarty, 2015).
On the other hand, over time, the interest of business firms in conglomeration in the emerging economies will decrease because of its long term disadvantages. This type of strategy is difficult to manage during the economic slowdown, as it need highly experienced workers in different filed to handle the pressure of two different industries (Tianjiao, 2014). In the emerging economies, the company should have rich resources and unique capabilities, but the pressure of managing unrelated diversification will reduce the potential of the firms to target the customers. Further, additional efforts and high cost of strategic implementation for expansion of business through conglomeration will also reduce the level of profitability.
At the same time involvement of a diversified workforce from different industry will also creates the chances of development of a negative culture in the firm and a reduction in productivity and job satisfaction of the workforce due to change (Peng, 2014).
References
Peng, M. (2014). Global strategy (3rd edition). Mason, OH: Cengage Learning.
Chakrabarty, S. (2015). The Influence of Unrelated and Related Diversification on Fraudulent Reporting. Journal of Business Ethics, 131 (4), 815-832.
Tianjiao, Q. (2014). Product Diversification and Market Value of Large International Firms: A Macroenvironmental Perspective. Journal of International Marketing. 22 (4), 86-107.