The main issues that need to be addressed by a company that has chosen the path of diversification are:
What is the degree of attractiveness of a particular line of business at the present time and in the future?
What will the company look like in a few years?
What needs to be done for this?
To answer these questions, it ios database is necessary to conduct a strategic analysis of diversification. Let's consider its main stages.
Study and assessment of the current situation in the company and its strategic actions:
What level of diversification has been achieved. In other words, what is the ratio of total sales to sales of a specific division.
What is the nature of the business operations (domestic, multinational, global).
What type of diversification is used (related, unrelated, combined).
In what direction is the company most active (for example, creating and developing new main divisions or strengthening the positions of existing ones).
What measures were taken to expand the portfolio, capture new industries and cease operations in unprofitable areas of activity.
Was diversification used to improve one's own competitiveness?
How do investments in different divisions compare?
Stages of developing a diversification strategy
Matrix analysis of a diversified portfolio based on any pairs of indicators, such as industry growth rates, market share, competitiveness, long-term attractiveness, etc.
Evaluation of the attractiveness of the field of activity. It is considered in itself and in relation to other industries. Having conducted the analysis, the company ranks them so that key areas of activity develop in promising areas.
Comparison of the level of development of departments. This study is based on the analysis and assessment of the following indicators:
the relative market share that a corporation owns (its size determines the company's competitive position);
the ability to consistently compete on price and quality;
prospects for new product development;
the level of competence and experience of managers (is it sufficient to achieve goals);
profit relative to competitors;
understanding of the processes taking place in the market, as well as customer needs;
production capabilities;
marketing activities;
reputation, brand awareness;
management level.
Comparison of the prospects of business units based on indicators of growth in production volumes and profits, share in the company's total income, return on investment, and cash flow.
Analysis of the strategic compliance of departments (whether they fit into the company's global plans). In other words, an assessment is made of the compliance of the activities of departments/branches with existing and new areas into which the company can diversify (enter). If any of the departments falls outside the overall development strategy, it is liquidated. This is especially true for related diversification.