Pony‘s Presentation

Presentation
Good morning ,everyone! Today ,my topic is effects of diversification strategy on enterprises. there are four main aspects to this topic. First of all, I will introduce the concept and motivationsof diversification strategy ，and then compare positive effects and negative effects of diversified mode on companies, after thatI will give some suggestions and make a conclusion at the end of my presentation.
With the industrial competition getting fiercer and fiercer，diversification strategy has become one of the major ways advocated by companies to pursue long-term profitability and seek new opportunities.But in the same time ,a study showed that in1986 to 1991,it selected more than 3600 companies ……….so it can seen that , due to the misunderstanding and misapplication of diversification strategy, enterprises suffered great losses in search for diversificatio n. How does the diversification strategy affect on
companies? Is it a magic way to success or a terrible trap?In the next fewminutes, you will probablyget some inspiration.
So, What is diversification strategy?Most researchersdefined diversification according to their own environment, so there is no unanimous consensus yet on concepts and metrics of diversification for all enterprises.However, it is widely accepted that diversification strategy is form of corporate strategy. it is not only a market strategy，but also a product strategy .It seeks to increase profitability through greater sales volume obtained from new products and new markets.
Here is the Product/Market Ansoff matrix which defined the diversification is part of the four main growth strategy.Ansoff pointed out that a diversification strategy stands apart from the other three strategies. The first three strategies are usually pursued with the same technical, financial, and merchandising resources used for the original
product line, whereas diversification usually requires a company to acquire new skills, new techniques and new facilities.
In light of the concept, it seems to be an effective method for companies’sustainable development. Why did lots of firms fail? Let’s move on to comparing the strengths and the weakness, and then we can find the reasons.
As for the strengths, it should be divided into two aspects.Theexternal competitivenessand internalefficiency .
For the external competitiveness, I show the benefits from industry ,market and consumer angles.Firstly, diversification strategy enables firms to realize the effective transfer of industry.when industry stays in a recession phase, Business diversification makes companies transfer into a new industry area. After getting into a new industry, enterprise gradually withdraw from the existing industry, and the main production lines will be set
in the new field Moreover, diversified strategy aims to explore new markets, which keeps the allocation of human and financial resources balanced. Therefore, companies should turn to a new product market field and look for new profit growth point, which form the diversified management.
Also, diversified products satisfy multi-demand of customers. With the increasingly improvement of people's living standards, diversified consumer demand has become a sign of the modern standard of living. As a result, it provides new investment opportunities for enterprises, which become another important external factor of diversification strategy.
In terms of internal efficiency,it contributes to costsaving,resource allocation and effective management.
According to Economics of scope by John Panzar and Robert D. Willing, when companies product two or more joint venture's products, the total cost
of production is lower than the sum of the cost of products produced separately. During a long-term business operation, it will produce and accumulate the resources, which are more than required for the company's day-to-day production and operation and finally become a potential ability (Teece, 1980). This potential ability means diversification can make full use of the enterprise technology and equipment to make up for the loss of surplus equipment capacity, and even use the excess sales force to sell similar products, which takes the advantage of the related products, customers and distribution channels. Diversification allows enterprise technology to achieve internal sharing to save research and development expenses. Also, diversified operations can be shared within corporate trademarks, brand and corporate image to reduce product cost barriers to enter the market.Diversified management means operating many industries at the same time，which leads to timely responses and flexibility. “Due to its stronghold and windows in many industries,
diversified companies have a fast reaction of different industries and products.
As for the negative effects, diversified companies should be afflicted with three main risks.From the original industry, overall market, andoperationalmanagement . In 1990, a book named "The Competitive Advantage of Nations" written by Porter made some comparisons of several countries, which conducted diversified strategy in different degree. The results showed that “U.S. and British companies, which took the unrelated diversification strategy, were afflicted with severe recessions in the sense that their competitiveness distributed in different business segments”(Porter, 1990,p.36)diversification might necessitate significant expanding of human and financial resources, which may detracts focus, commitment and sustained investments in the core industries.
going into an unknown market with an unfamiliar
product offering means a lack of experience in the new skills and techniques required. Therefore, the company puts itself in a great stly, management becomes more difficult if enterprise involves in the wide areas. Managers should cope with the challenges from competitors who can create some barriers toconsolidate their position in the market. In addition, diversified operation requires more management costs. Managers should also make a sound allocation plan of fundsto make sure the business runs smoothly. Last but not least, it is manifest that managing several business segments is much more complicated than supervising an industry. Therefore, management of diversified companies needs serious scrutiny.
Having comparing the advantages and disadvantages, we can see that if we control the risks immediately and make full use of strengths, the success of diversified operation will ensue.
We can follow Porters three essential tests: if
diversification is to create shareholder value, must meet tests before carring out.
1.The attractiveness test: must be directed
towards attractive industries
2.The cost of entry test: cost of entry must not
greater than all future profits
3.The better-off test: new unit must gain
competitive advantage from its link with the
company or vice versa, synergy must present
During the implement, we should Base on the core business to ensure financing sources. And make a strategic plan ,most importantly, companies should dedicate to talent training,which plays a key role in operation.
To sum up, diversification strategy is an effective way to
Admittedly, diversification has some adverse
impacts on corporate performance, such as
decentralizing force, erosion of
competitiveness, increasing difficulty of
management, etc. Even so, diversification is
still an effective way to realize sustainable development for companies. In light of the above analysis, the advantages of diversified model prevail over its disadvantages. It contributes to the effective transfer of industries, conquering new markets, meeting consumers’ needs. Also, enterprises' interior performance can be improved by making full use of internal resources, reducing the risk and internal flexibility.
So if companies follow rules in the gradual development，a sustainable growth of enterprises will ensue.
That’s all my presentation ,thank u .。