When an enterprise chooses the path of diversification, when problems arise that cannot be solved by any of the possible methods, they choose the path of curtailing one or several areas of its activity, as well as restructuring. Therefore, such diversification strategies include long-term policies of sale and liquidation, as well as restructuring, restoration and savings. Let us consider their essence in more detail.
Sale. A company decides to sell one of its businesses (or to exit a specific business while retaining some of its shares) if it has lost its potential and no longer fits the corporation's strategic policy.
Restructuring. During restructuring, the ios database composition and structure of the business portfolio of a company are radically changed, and the work of the corporation is organized differently. This strategy is used in the event of a deterioration in the company's performance indicators.
Liquidation. It consists of selling all assets of the enterprise. This procedure is considered the most painful for the company. However, when there is no other choice, it is preferable to liquidate the enterprise than to declare bankruptcy.
Types of diversification strategies
Recovery strategy. Consists of rehabilitation (revival) of loss-making enterprises when management does not want to abandon them due to their potential and prospects. Within its framework, the activities of the entire corporation are improved by improving the work of certain structural divisions (business units) that are causing losses or are simply ineffective.
Economy. The essence of the economy strategy is to reduce the scale of diversification and decrease the number of enterprises or the corporation as a whole. It is used if it is necessary to focus on improving work in specific areas that are stable and have clear prospects. At the same time, in other areas (companies) there are problems with making a profit. As part of the economy strategy, small enterprises (branches, companies) are eliminated that are not able to provide the corporation with sufficient profit. Or their activities (presence in the portfolio) do not correspond to the strategic goals of the entire business.
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