Most unrelated diversification efforts, however, do not have happy endings. The three forms of diversification may be related or unrelated. Diversification is a corporate-level strategy that can create value for an organization. The main advantage of this strategy is the diversification of risk over different industries, thereby making the company less dependent on one sector. Three Levels of Diversification Examples Mini Case Study: Amily Limited was established at Chittagong in Bangladesh in 1975 as a dairy farm. Despite the ever-growing fizzy-drinks market, conditions were not conducive to Virgin’s entry due to the existing players’ ability to block access to widespread distribution and a backlash in advertising spend – which ultimately limited Virgin Cola to just a 3% market share on its home UK turf before exiting. This strategy guides us as to how we can introduce new and correlated products in the new market we are entering. The unrelated diversification is based on the concept that any new business or company, which can be acquired under favorable financial conditions and has the potential for high revenues, is suitable for diversification. This is a good example ofunrelated diversification, which occurs when a firm enters an industry that lacks any important similarities with the firm’s existing industry or industries ("Unrelated Diversification at Berkshire Hathaway" [Image missing in original]). A firm that is pursuing unrelated diversification takes the position of pursuing any avenue that may generate profit rather than being concerned with creating a strategic fit. Horizontal Diversification. Explain with examples of related and unrelated diversification. Unrelated Diversification is a form of diversification when the business adds new or unrelated product lines and penetrates new markets. For example, if the shoe producer enters the business of clothing manufacturing. vary according to their levels of diversification. Virgin Atlantic’s market entry in the 1980s in a good example of this at a time when great customer service was a rare quality in the airline industry, which was instead plagued by cancelled flights, delays and lost baggage. Instead, Virgin tends to take an existing service or product and undercut prices or offers a slight variation on the business model. Virgin’s internal competence of providing an excellent customer experience throughout its existing family of companies offered an advantage that would be hard for competitor airlines to replicate – and therefore potential to charge a price premium. For example, a company named XYZ adopted a concentric diversification strategy and introduced cable lines for fast internet across the country. Penetrating completely new markets. In addition to achieving higher profitability, there are several reasons for a company to diversify. In the airline, broadband and gym industries to name just a few, Virgin is simply another player and fails to innovate in the way that a leader generally does. Diversification mitigates risks in the event of an industry downturn. With this in mind, a case could be argued that Richard Branson is now attempting to revisit the past and recreate a more distinctive image, such as through the publicity generated around the launch of Virgin Galactic, which aims to launch the first commercial spaceflight. It’s more about not putting all your eggs in one basket. Unrelated Diversification is a form of diversification when the business adds new or unrelated product lines and penetrates new markets. Richard Branson summarises the Virgin Group’s modern strategy with the quote; “Business opportunities are like buses, there’s always another coming along”. If somebody was to ask what industry Virgin operates in primarily, the first thought that comes to mind would inevitably vary between each of us. Related diversification represents a strategic approach to value creation because it is predicated on exploiting the links between the activity-cost chains of different businesses to lower costs, transfer skills and technological expertise, and gain benefit of other kinds of strategic fit. Luckily for Coca-Cola, its investment paid off—Columbia was sold to Sony for $3.4 billion just seven years later. The unrelated diversification seems to be applicable and meaningful in at least two cases: Firstly, if the parent company is able to provide different businesses with managerial knowledge and expertise that strengthens the individual business, it will be very feasible to diverse into different markets that will potentially increase parent company profits. It Example Of Unrelated Diversification Strategy is important for the traders to realize that binary Example Of Unrelated Diversification Strategy options trading and forex trading are two distinct topics. Diversification into many unrelated areas is an example of a) Risk management b) Good management c) Uncertainity reduction d) Sustainability Before starting out with any of them, it is imperative for the traders to be fully Market diversification and product … Let’s hope it’s much clearer and consistent than it is today. ( Log Out /  For example, the same phone company might decide to go into the television business or into the radio business. However, the unrelated diversification strategy is far from full proof and there are numerous examples in which it has failed for Virgin. For example a car dealer may start offering financial services by developing a car leasing scheme and selling cars through leasing. 5 million (Taka is a Bangladeshi currency name), which increased to Tk. This is unrelated diversification: there is no direct fit with the existing business. Lastly, market development. This is a good example of unrelated diversification, which occurs when a firm enters an industry that lacks any important similarities with the firm’s existing industry or industries (Table 8.1). An example of conglomerate diversification would be Tata Group, which was founded in 1868 and diversified from its humble beginnings as a hotel company into a global multinational encompassing 100 individual companies. For examples, the unrelated diversification on Apex Company has other business sector, which is effluent treatment plant, a purification plant for drinking water, a medical and life insurance. Unrelated Diversification is a form of diversification when the business adds new or unrelated product lines and penetrates new markets. This is due to the Virgin Group partaking in what’s known as ‘unrelated diversification’ – the fifth strategy in Ansoff’s Matrix. Add new products to the existing products in similar markets that will serve similar customers through the same distribution system. For example, a ketchup manufacturer starts producing salsa, using its current production facilities. What will come to mind when somebody says Virgin to us in 2024? Looking back to 1970s and the start of its operations as a record mail order company and record store soon after, given the rapidly changing nature of the music industry since, it is possible that the company would no longer exist if it hadn’t innovated in this way. Most unrelated diversificatio… 2. Conglomerate diversification is growth strategy that involves adding new products or services that are significantly different from the organization's present products or services. Change ), You are commenting using your Google account. Are commenting using your Twitter account industrial, and finance industries worldwide is growth strategy that involves adding products. 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