Literature And Diversification Review

Literature and diversification review

Introduction

Diversification, concept and typologies. Diversification has been a topic of interest to researchers over time, however, an agreement has not been reached in which it can be defined or conceptualized in a standard and commonly accepted way, according to (Rumelt), in such a way, in the words of Hoskisson and Hitt "there is still no commonly accepted theoretical framework that explains the background of diversification and the relationship between diversification and the result". However, diversification can be defined as: “The entry of a company or business units towards new lines of activity, 

Developing

Through the development of internal business processes or acquisition, which causes changes in its administrative structure, systems and other management processes ”as described (Ramanujan & Varadarajan). Finally, Suarez, 1993 defines business diversification such as: "decisions tending to expand and/or make the scope of the company" more diverse ". However Ansoff & Rumelt propose different types in which the different existing diversification strategies used by companies are classified. As Steiner states, he shows himself as "diversifying or dying". 

Stating that to survive a company in the long time you must diversify the opposite case will disappear ceasing its operations. In this way, as indicated (well, Morcillo, & de Pablo) the companies that wish to live and grow must diversify, and their essential strategic concerns will be to distinguish the proper degree of diversification and even the way in which diversification will be carried out.

Ansoff is attributed one of the most popular and extensive typologies of basic growth strategies, which proposes and is based on the classification in relation to the current situation of companies against new developments in product and market issues.

Thus defining two elementary strategies: expansion strategy. Diversification strategy. In turn, it establishes that the diversification strategy is based on the simultaneous addition of new products and new markets by the company that currently already exist. Indeed, although the diversification strategy assumes the entry into new markets at the same time that new products enter, it presumes that they may or may not have some way relationship with those already existing today. However, based on this Ansoff consideration, it establishes four diversification strategies.

Horizontal diversification. Vertical diversification. Concentric diversification and conglomerate diversification. By similarity of form and based on the strategic management approach, another derived typology is generated, which alludes to Wrigley the original classification, the same that in a subsequent study would be disaggregated and disseminated by (Rumelt). With the realization of its primary contribution: (Distinction between: Unique Business- Dominant Business; Related Diversification- Unrelated Diversification). According to (Rumelt) the tangible attempt to jointly exploit production factors such as: the existence of common resources, markets in common.

Shared technologies is called related diversification. Based on an economic analysis, several researchers have studied the respective result between diversified and universified companies, concluding that diversification is an attribute of the sector which can directly affect the average profitability of this sector this to verify which degreeof affectation caused by business diversification. On the other hand when there is a higher level of rupture in the current situation.

conclusion

Since new products and markets do not entail any relationship with the company’s commons to this is called unrelated diversification. (Suárez) proposes that: diversification is not considered as a type of strategy, rather it is considered an attribute of the sector as already mentioned above. The strongest argument of this proposition is that “participating in more than one business allows companiesCardinal, Miller, & Palich).