- This topic has 1 reply, 2 voices, and was last updated 2 years ago by
.
- Posts
Dear Sir,
I have a confusion regarding the ans-off matrix on the diversification strategy on related companies, is vertical integration a diversification strategy.
For me it appears that backward vertical integration is a diversification strategy as the company is moving into making raw materials of its products which is a new product and also a different market.
However forward vertical integration appears to me to not be a diversification strategy as the company is now selling its products to a new market for example setting a retail company but still the product is the same the only change is the market hence this could be a market development.
Sir your opinion would help me to clarify this point.
Backward integration is, as you say, a form of diversification (related diversification).
Forward integration, such as a manufacturing company acquiring a retail chain, means that the group now has to manage the retail organisation which will be selling to consumers and will, almost certainly, be selling a range of products where many are sourced from other suppliers. I think that looks like diversification.
I think the new market element of the Ansoff matrix means, for example, expanding your current operations into new countries. Here, the company is carrying on its existing operations in a new market so is not diversification.
- You must be logged in to reply to this topic.