What is meant by diversification?

Diversification is a risk management strategy that mixes a wide variety of investments within a portfolio. The rationale behind this technique is that a portfolio constructed of different kinds of assets will, on average, yield higher long-term returns and lower the risk of any individual holding or security.

What is retrenchment strategy example?

The process of assigning a business function or process to an external partner, often to reduce costs. Outsourcing is only retrenchment when it is done urgently. For example, an IT company that suddenly sells its data centers and outsources to the company that purchases the data centers to generate cash in a crisis.

What are the types of diversification strategy?

Types of diversification strategies

• Horizontal diversification.
• Vertical diversification.
• Concentric diversification.
• Conglomerate diversification.
• Defensive diversification.
• Offensive diversification.

What are the risks of diversification?

Disadvantages of Diversification in Investing

• Reduces Quality. There are only so many quality companies and even less that are priced at levels that provide a margin of safety.
• Too Complicated.
• Indexing.
• Market Risk.
• Below Average Returns.
• Bad Investment Vehicles.
• Lack of Focus or Attention to Your Portfolio.

What are the four types of strategic control?

Strategic Control – 4 Major Types: Premise, Implementation, Strategic Surveillance and Special Alert Control. Experts on strategic management process have identified certain types of strategic controls.

What is divestiture strategy?

Sale. One divestiture strategy involves the sale of the subsidiary or business line to another company. The parent company decides that it no longer serves as the best owner of that portion of the business. Sometimes unsolicited buyers will approach to buy the subsidiary. More often, the parent must seek out buyers.

Is related diversification or unrelated diversification more likely to create value and how is it more likely to do so?

Regarding the type of diversification, our main results show that related diversification is more value-creating than non-related diversifica- tion is, and that non-related diversification is more likely to turn into a value-destroying strategy at lower levels than related diversification.

What is an advantage of unrelated diversification?

The benefits of unrelated diversification are rooted in two conditions: (1) increased efficiency in cash management and in allocation of investment capital and (2) the capability to call on profitable, low-growth businesses to provide the cash flow for high-growth businesses that require significant infusions of cash.

How do you classify strategic control?

Types of strategic control

1. Premise control. Premise control is designed to check systematically and continuously whether the premises on which the strategy is based are still valid.
2. Strategic surveillance.
3. Special alert control.
4. Implementation control.

What are the five 5 factors that support strategy implementation?

There are several factors that seem to have a major impact on an organization’s ability to implement.

• Commitment.
• Ability and willingness to change.
• An organizational structure that supports the strategy.
• Ability to measure progress.
• A clear understanding of priorities.

What diversification strategy does Disney use?

Disney uses product differentiation as its generic strategy for competitive advantage. Michael Porter’s model states that this strategy involves unique products offered to many market segments.

What are the three types of diversification?

There are three types of diversification: concentric, horizontal, and conglomerate.

• Concentric diversification.
• Horizontal diversification.
• Conglomerate diversification (or lateral diversification)

What kind of strategy is retrenchment?

Retrenchment strategy is a corporate level strategy that aims to reduce the size or diversity of organizational operations. At times, it also becomes a means to ensure an organization’s financial stability. This is done by reducing the expenditure.

What are the two types of diversification?

Diversification Strategies

• Concentric diversification. Concentric diversification involves adding similar products or services to the existing business.
• Horizontal diversification. Horizontal diversification involves providing new and unrelated products or services to existing consumers.
• Conglomerate diversification.

Which of the following is an example of diversification?

1) Which of the following is an example of diversification : The correct answer is e) Market expansion.

What type of diversification is Disney?

The Walt Disney Company’s diversification strategy can be classified as related linked. Disney is in the theme park, movie/TV production, TV broadcasting, and merchandising industries. Several of these businesses market the same characters across them such as Mickey Mouse.

What are the two ways an unrelated diversification strategy can create value through financial economies?

Unrelated diversification can create value through two types of financial economies: efficient internal capital market allocation and restricting a firm’s assets.

Which is the major reason for retrenchment strategy?

The major reasons for adopting retrenchment strategies are: (1) The management no longer wishes to remain in business either partly or wholly due to continuous losses and the organisation becoming unviable. (2) The environment faced is threatening.

What are the five steps in the strategic control process?

The five stages of the process are goal-setting, analysis, strategy formation, strategy implementation and strategy monitoring.

What is growth strategy?

A growth strategy is an organization’s plan for overcoming current and future challenges to realize its goals for expansion. Examples of growth strategy goals include increasing market share and revenue, acquiring assets, and improving the organization’s products or services.

When a retrenchment strategy is followed the goal is often?

1. What do you understand by retrenchment strategies?  A strategy used by corporations to reduce the diversity or the overall size of the operations of the company. This strategy is often used in order to cut expenses with the goal of becoming a more financial stable business.

What are the signs of external retrenchment?

19 Early Retrenchment Signs You Need To Know

• Your boss is communicating less frequently with you.
• HR Meetings become long and frequent.
• Outsiders are talking about retrenchment.
• You don’t get invited to regular meetings.
• You are getting bypassed.
• You receive a new understudy.
• Your training applications routinely get rejected.