by John Whonderr-Arthur Esq Phd

Created on: June 11, 2009   Last Updated: June 12, 2009

Related, Unrelated and Multinational Diversification as Forms of Business Strategy Planning.

When growing up, a friend of mine used to say that "if you jump and do not go up, you rather would not have jumped." Business strategy (or Business level strategy) is concerned with how businesses compete or fare in their chosen product markets and whether they are able to gain and sustain the competitive advantage gained.Competition is keenest than ever and the only thing against strategy is 'illegality'.

Business strategy planning is involved in crafting a path for the business in its chosen product market, to position the product such as to gain a competitive advantage over its competitors and as a long-term phenomenon to enter a new market or develop a new product all in a bid to sustain its competitive advantage.

As pointed above in a bid to sustain a competitive advantage or increase the value of the business, some firms diversify. Diversification moves away from its present markets and its present products at the same time. In this article diversification would be discussed under three forms related, unrelated and multinational diversification.

Related diversification comes about when the organization moves or diversifies into a new product and new market which are considered as related business activities. For example, a paper producing company may diversify into book publishing known also as concentric diversification; it is sometimes argued as to whether this is a true form of diversification. The spate of companies using diversification as a form of expansion cannot be over emphasized due to the advantages and the likelihood that similar customers in similar markets might be reached. Some of the reasons for related diversification are discussed here.

The company spreads the risk by engaging into a related product and market using in most instances the same experience. To ensure continuity of supply, a manufacturer may try to own its own supply outlets; say a car manufacturer produces its own components. The aircraft manufacturer, Boeing's Integrated Defense systems, for example is a subsidiary established to integrate and provide instantaneous, accurate and protected information to decision makers and soldiers in the field when they need it, anytime, anywhere.

Sometimes it is difficult to distinguish when a strategy is a generic differentiation or a related diversification. The rationale for related diversification is strategic. This is to say that

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