As a small business owner looking for business growth, an acquisition diversification strategy can be very attractive. But you need to understand the differences between related diversification and unrelated diversification before investing. To diversify in your business, your market, or your products can be expensive; Therefore, investing in an efficient diversification.
Generally companies diversify through acquisition. Why diversify? The reasons must be focused on the rapid and / or growth less expensive growth. However, conducting a strategic analysis to investigate whether the growth decision will result in a return on investment that is high enough to cover the risks associated with acquisitions.
What are the most effective diversification strategies for your business? To diversify efficiently through the acquisition means ensuring that you have built or will build, strategies to increase competitive advantage, to improve economies of scale and improve the cost structure, to meet the needs of customers quickly, or get your business plan.
Entrepreneurs need to assess the advantages and disadvantages of the related or unrelated diversification.
Advantages and disadvantages of related diversification:
A related strategy is when you add or expand products, services or existing markets. For example, an automobile dealer who purchases a business in detail (cleans, washes, polishes cars - both inside and outside) is engaged in related diversification.
The advantage of this type of related strategy is that it provides easier expansion: you already know the industry you operate in and you can take advantage of this knowledge.
The disadvantage of this strategy is that if there is a seasonal or cyclical downturn in the industry, you feel the fall in both the dealership and business details. The impact could be severe. There may also be problems with the integration of two companies, and the excess of estimated financial returns. It would have been cheaper to simply contracting out the detail in the above example?
Advantages and disadvantages of diversification offline:
An unrelated strategy is when you add new , or unrelated, products, services or markets. For example, the same automobile dealership may decide to buy the restaurant next door. There is no direct connection between the two companies (though perhaps employees and customers eat at the restaurant next door). The reason to buy the business is that the dealership's owner wanted to get into a business that was dissimilar, had different seasonality, good potential for higher returns (although the restaurant industry has some high-risk / high failure statistics) .
The advantage of buying a company not related is that it reduces the risk of putting "all your eggs in one basket"; If the activity, or the industry, was severely affected the economy, or competition, or other factors of success, therefore possess a related business can help offset the collapse. In this example, you can also control some of the customers for the restaurant (for example, give your automotive customers waiting for service of a coupon for the restaurant).
Why invest in diversification uncorrelated? Because you may be able to invest in a new product or new market that has "peaks", when the company "valleys." Many companies have high and low seasons; if you can acquire a business that has a high when your business has a low, it is possible to compensate for the low periods. O investment diversification unrelated can bring cost efficiency (as subleasing bit 'of your office or plant room for the new business, or sharing / consolidate some of the administrative costs of running a business - human resources , accounts receivable and payable, shipping and warehousing, sales, and more). Increased profit potential pushes an investment in foreign acquisition.
0 Komentar