Introduction

To build and maintain a competitive advantage, businesses must be constantly reviewing their strategies to continue growing. Sometimes growth can be achieved through a diversification strategy, utilizing a company’s established competencies to penetrate another industry or expand into a new segment of their current industry.

Purpose

The purpose of this exercise is to practice the ability to develop corporate-level strategies to improve the overall strength and profitability of a company through diversification.

Skills

In this project, you will have the opportunity to practice valuable strategic management skills, including:

• Critical thinking
• Troubleshooting
• Business analysis
• Teamwork
• Problem solving

Project Instructions

GETTING STARTED

You are on the leadership team of a large technology firm that focuses on customer relations management (CRM). Your premium computer software products include superior interface design and are always current because of the software as a service (SAAS) platform. The Board of Directors decided that it could leverage the company’s competencies in its current industry through expansion and creation of a new business unit in a different industry. The overall goal is to increase profitability. You will develop a strategy to achieve that goal.

Activity Steps (IMPORTANT!!!)

Step 1: To begin, discuss what you know about diversification. Discuss the pros and cons of related diversification and unrelated diversification.

Step 2: Diversification: Based on the industry your company is competing in, discuss how diversification could be implemented. What are the possible strategies to diversify? What products or businesses could your firm enter to achieve a profitable diversification? Develop ideas in both unrelated and related diversification. Decide which diversification idea you will pursue and identify the type of diversification.

Step 3: Mode of Entry: Determine which method of entering new industries is best for your company. Discuss the pros and cons of each method. Develop cases for each to determine which method your business should pursue. Remember, the goal is profitability.

Step 4: Resources: Explain how your resources are aligned with your strategy. Will you leverage competencies, share resources or transfer knowledge? Develop a case for how your diversification strategy will increase profitability. Why is this scenario the best? Why were the other options not viable?

Step 5: Create at least a 5 page business plan that pitches your idea. Remember that you are going to deliver this plan to the Board and should address all each of the areas discussed here. Use the steps as your plan headlines. Walk the board through your decision making process and convince them that this is the best strategy to increase profitability of the company.