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HYPOTHESIS: “IF YOU WANT TO GROW, THEN

DIVERSIFY”

DEFINITION Diversification is a form of corporate strategy for a company that seeks

to increase profitability through greater sales volume obtained from new products and

new markets. Diversification can occur either at the business unit level or at the corporate

level. At the business unit level, it is most likely to expand into a new segment of an

industry which the business is already in. At the corporate level, it is generally entering a

promising business outside of the scope of the existing business unit.

Diversification is part of the four main marketing strategies defined by the Product/Market

Ansoff matrix:

Ansoff pointed out that a diversification strategy stands apart from the other three

strategies. The first three strategies are usually pursued with the same technical, financial,

and merchandising resources used for the original product line, whereas diversification

usually requires a company to acquire new skills, new techniques and new facilities.

Diversification is a means by which a firm expands from its core business into other product

markets. Research shows corporate management to be actively engaged in diversifying

activities. It was found that in 1974 only 14 percent of the Fortune 500 firms operated as

single businesses and 86 percent operated as diversified businesses. Many researchers note

a rise in diversified firms. European corporate managers according to a survey, not only

favor it but actively pursue diversification. Firms spend considerable sums acquiring other

firms or bet heavily on internal R&D to diversify away from their core product/markets. Of

late U. S. firms are beginning to moderate their zeal for diversification and are consolidating

around their core businesses. But this trend has not affected large Asian corporations which

continue to remain highly diversified.

Diversification

Product

Development

Market

Development

Market

Penetration

Products

Present

Present

New

New

Markets

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Diversification can improve debt capacity, reduce the chances of bankruptcy by going into

new product/ markets, and improve asset deployment and profitability. Skills developed in

one business transferred to other businesses, can increase labor and capital productivity.

A diversified firm can transfer funds from a cash surplus unit to a cash deficit unit without

taxes or transaction costs. Diversified firms pool unsystematic risk and reduce the variability

of operating cash flow and enjoy comparative advantage in hiring because key employees

may have a greater sense of job security. These are some of the major benefits of

diversification strategy.

Diversification, firm size, and executive compensations are highly correlated, which may

suggest that diversification provides benefits to managers that are unavailable to investors,

creating what economists call the agency problem and managers stand to lose if they

become unemployed, either through poor firm performance or bankruptcy. Diversification

can also lead to the problem of moral hazard, the chance that people will alter behavior

after entering into a contract-as in a conflict of interest by providing insurance for managers

who have invested in firm specific skills, and have an interest in diversifying away a certain

amount of firm specific risk and may look upon diversification as a form of compensation.

Although it may be necessary for a firm to reduce firm specific risk to build relations with

suppliers and employees, only top managers can decide what is the right amount of

diversification as insurance. Diversification can be expensive and place considerable stress

on top management. These are the costs of diversification.

As in any economic activity there are costs and benefits associated with diversification, and

ultimately, a firm's performance must depend on how managers achieve a balance between

costs and benefits in each concrete case. Moreover, these benefits and costs may not fall

equally on managers and investors. Management researchers argue that diversification

prolongs the life of a firm. Researchers in finance argue diversification benefits managers

because it buys them insurance, and shareholders usually bear all the costs of such

insurance.

A concept known as Specialization Ratio (SR) can be used to classify firms into three classes

of diversification. Its logic reflects the importance of the firm's core product market to that

of the rest of the firm. Operationally, SR is a ratio of the firm's annual revenues from its

largest discrete, product-market activity to its total revenues. In the diversification

literature, SR has been one of the methods of choice for measuring diversification. It is easy

to understand and calculate.

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Values of Specialization Ratios

SR VALUES

Undiversified, Single Product Firms

SR ≥ 0.95

Moderately Diversified Firms

0.95 < SR ≤ 0.70

Highly Diversified Firms SR < 0.70

The table above classifies firms into three groups-(1) single product firms with SR ≥ 0.95; (2)

moderately diversified firms with SR values between 0.95 < SR ≤ 0.70. This group includes

dominant, relatedly diversified and unrelatedly diversified firms; (3) the highly diversified

category of firms have SR < 0.70 and include conglomerates, relatedly-constrained and

relatedly-linked firms. A firm is moderately diversified if its sales from its dominant business

lies between 95 percent and 70 percent of its total sales, and a firm highly diversified if the

sales from its dominant business are below the 70 percent mark.

EXAMPLE OF TATA GROUP Let us take the example of Tata Group and calculate its SR

to determine its level of diversification.

TOTAL REVENUE (for 2008 - 2009) Rs. 325,334 crores

SECTOR CONTRIBUTING MOST TO TOTAL REVENUE Materials

REVENUE FROM LARGEST CONTRIBUTOR Rs. 146,400 crores

SPECIALIZATION RATIO 0.45 (i.e. 45%)

Source: http://www.tata.com/htm/Group_Investor_GroupFinancials.htm

Thus, referring to the table above, we can clearly see that Tata Group is a highly diversified

company.

TYPES OF DIVERSIFICATION STRATEGIES The strategies of

diversification can include internal development of new products or markets, acquisition of

a firm, alliance with a complementary company, licensing of new technologies, and

distributing or importing a products line manufactured by another firm. Generally, the final

strategy involves a combination of these options. This combination is determined in

function of available opportunities and consistency with the objectives and the resources of

the company.

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

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CONCENTRIC DIVERSIFICATION This means that there is a technological similarity

between the industries, which means that the firm is able to leverage its technical know-

how to gain some advantage. For example, a company that manufactures industrial

adhesives might decide to diversify into adhesives to be sold via retailers. The technology

would be the same but the marketing effort would need to change. It also seems to increase

its market share to launch a new product which helps the particular company to earn profit.

HORIZONTAL DIVERSIFICATION The company adds new products or services that are

technologically or commercially unrelated (but not always) to current products, but which

may appeal to current customers. In a competitive environment, this form of diversification

is desirable if the present customers are loyal to the current products and if the new

products have a good quality and are well promoted and priced. Moreover, the new

products are marketed to the same economic environment as the existing products, which

may lead to rigidity and instability. In other words, this strategy tends to increase the firm's

dependence on certain market segments. For example company was making note books

earlier now they are also entering into pen market through its new product.

CONGLOMERATE DIVERSIFICATION The company markets new products or services

that have no technological or commercial synergies with current products, but which may

appeal to new groups of customers. The conglomerate diversification has very little

relationship with the firm's current business. Therefore, the main reasons of adopting such a

strategy are first to improve the profitability and the flexibility of the company, and second

to get a better reception in capital markets as the company gets bigger. Even if this strategy

is very risky, it could also, if successful, provide increased growth and profitability.

RATIONALE FOR DIVERSIFICATION According to Calori and Harvatopoulos

(1988), there are two dimensions of rationale for diversification. The first one relates to the

nature of the strategic objective: diversification may be defensive or offensive.

Defensive reasons may be spreading the risk of market contraction, or being forced to

diversify when current product or current market orientation seems to provide no further

opportunities for growth. Offensive reasons may be conquering new positions, taking

opportunities that promise greater profitability than expansion opportunities, or using

retained cash that exceeds total expansion needs.

The second dimension involves the expected outcomes of diversification: management may

expect great economic value (growth, profitability) or first and foremost great coherence

and complementary to their current activities (exploitation of know-how, more efficient use

of available resources and capacities). In addition, companies may also explore

diversification just to get a valuable comparison between this strategy and expansion.

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WHY DIVERSIFICATION? The two principal objectives of diversification are:

1. improving core process execution, and/or

2. enhancing a business unit's structural position

The fundamental role of diversification is for corporate managers to create value for

stockholders in ways stockholders cannot do better for themselves. The additional value is

created through synergetic integration of a new business into the existing one thereby

increasing its competitive advantage.

Ultimately, the responsibility of managers is to maximize the wealth of the owners or the shareholders. If diversification efforts are consistent with the objective of owners, then it is a good idea. When the firm diversifies, the growth of sales becomes less vulnerable to industry-specific events, which reduces the risk faced by managers whose performance is tracked by behavior of firm profits. Therefore reducing volatility is attractive to the top management. This is most sharply observed when the CEO is given a bonus as percent of profits: with diversification, the volatility of profits diminishes and the year-to-year income of the manager becomes more stable.

Another effect of diversification is through the size of firms. Firms diversifying through acquiring other firms increase in size. Many of the hidden payoffs to top management (like perks and prestige) are a function of the sheer size of the company.

CASE IN POINT: TOYOTA, NISSAN, AND HONDA In late 1980s, Toyota , Nissan, and

Honda moved into adjacent market segments. They launched luxury cars Lexus, Infinity, and Acura respectively to compete with BMW and Mercedes. The Japanese cars were priced about one-third lower and had a superior service network. The value proposition was solid enough to win over potential and current BMW and Mercedes customers, despite the power of their brands. Yet the Japanese also expanded this profitable segment as a whole.

Let us now consider, in detail, the reasons why a company diversifies.

1. ECONOMIES OF SCALE AND SCOPE (SYNERGY) The merger of two companies

producing similar products should allow a firm to pool production and attain lower operating costs. The economy may come from reduced overhead or the ability to spread a larger amount of production over lower (consolidated) fixed costs. There may also be differential management capabilities: an efficiently managed firm may acquire a less efficient firm with the intent of bringing better management to the business. Efficiencies can also be gained through pooled financial resources or simply through pooled risk.

Examples of Economies of Scope

Levi Straus jeans for men - expanded to jeans for women and children (exploits product manufacturing capacity)

Humana - hospitals and HMO's (exploits shared knowledge of patient care)

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IBM - mainframes and PC (exploits brand identity/technology through shared marketing/production/distribution efficiencies)

2. MARKET POWER Mergers and acquisitions can increase a firm's market share when

both firms are in the same business. The acquisition by Advance Auto Parts of Sears' Western Auto propels this Virginia-based privately held firm into one the nation's largest retailer of automotive parts. But, market share does not necessarily translate to higher profits or greater value for owners unless it substantially reduces market rivalry. Then, the problem is the prospect of anti-trust action by the Justice Department.

3. PROFIT STABILITY Acquisition of new business can reduce variations in corporate

profits by expanding the corporation's lines of business. This typically occurs when the core business depends on sales that are seasonal or cyclical. Farmers plant a spring crop and a fall crop precisely to ensure year-round income from the sale of products.

Hallmark: An Example of Diversification for Profit Stability

Perhaps no industry is more subject to seasonal cycles that manufacturers of greeting cards. Predictably, sales are highest at traditional holidays. Privately owned, Hallmark Cards, Inc. and its Ambassador subsidiary have a 44% share of the greeting card market . In 1910 Joyce Hall as an eighteen year old started selling post cards from his rented YMCA room in Kansas City, Missouri. In 1911 Joyce's half-brother joined the fledgling enterprise and greeting cards were added to the product line. Hall Brothers store was established specializing in postcards, gifts, books and stationary. When a 1915 fire destroyed everything, the brothers obtained a loan, bought an engraving company and began producing greeting cards in time for Christmas. In 1928 the company covered the U.S. market and introduced gift wrap. In 1936 the company introduced the case display for their cards. In 1950 Hall Brothers opened their first greeting card store and in 1951 began its "Hallmark Hall of Fame" television production. The company has consistently expanded its lines of products to insure against the seasonal nature of its core product. In the 1980's Hallmark acquired Binney and Smith, manufacturer of Crayola Crayons and Magic Markers, and Univision, a Spanish language TV network. In 1990 the company acquired Dakin, manufacturer of plush toys. Hallmark also owns the portrait studio chain Picture People and continues to expand its TV programming through Hallmark Entertainment. Diversification strategies also apply to the more general case of spreading market risks: adding products to the exiting lines of business can be viewed as analogous to an investor who invests in multiple stocks to "spread the risks". Diversification into other lines of business can especially make sense when the core product market is uncertain.

Philip Morris: Diversification Away from the Core Business

Anticipating that the cigarette industry would decline in the future, Philip Morris decided to diversify its product offerings and looked for acquisitions of unrelated products to decrease dependence on the future of tobacco. In 1970 it acquired Millers' Brewing for $ 227 million. Miller was the eight largest U.S. brewer with a 4.4% market share. Philip Morris increased Miller production, introduced new lines of products (Miller Malt Liquor, Milwaukee Ale, Miller Ale), acquired Meister Brau in 1972, and in 1975 introduced Miller Lite. By 1972,

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under Philip Morris Miller grew to the 3rd largest brewer, behind Schlitz; in 1980, Miller overtook Schlitz to become the second largest brewer. Today Philip Morris Companies is a holding company with a diversified product offering: Miller Brewing, General Foods (acquired, 1985), Kraft, Oscar Meyer (acquired, 1981), and Philip Morris. In 1989, tobacco products accounted for 40% of sales, food products ac counted for 51%, and beer accounted for 8%.

Financial theorists argue that the impact of diversified business portfolios for corporations is that the corporation has replaced the traditional role of the investor in picking winners and losers in industry investments. This raises the agency problem: why should investors protect management from market risks by funding diversification of the firm - the risk minimization benefit accrues to the manager in terms of job security. So, question is: does diversification accrue benefits to investors?

4. IMPROVE FINANCIAL PERFORMANCE Large firms generate cash that can be

invested in other ventures. The firm acts as a banker of an internal capital market.. Sharon Oster cites the example of The Children's Television Network using funds generated by its Sesame Street production to strategically piggyback. That is, the core business sustains itself on its money making ventures, and uses this cash flow to create new ventures that generate additional profits.

5. GROWTH Diversification is simply a way to grow. Indeed, some authorities cite growth

as the principle reason for diversification. Unlike natural growth which takes time for planning, developing, and implementing a new project, an acquisition or merger can be achieved fairly quickly with a staff, systems, technology and experience immediately available.

TCI: A Growth Company

Telecommunications, Inc. (TCI) has been a fast growth communications company, expanding mainly through acquisitions. TCI began in 1956 when a Texas rancher, Bob Magness, sold some cattle to start a cable TV system in Memphis, Texas (a Texas Panhandle town). In 1965 Magness expanded to service small Rocky Mountain towns. In the mid-1970's when TV cable operators were struggling, Magness bought their operations at discount prices and continued to expand. In 1986 he bought United Artists Communications, the largest operator of movie theaters and cable tv franchises. TCI through debt financing continued to acquire communications and cable operations, including part ownership of Turner Broadcasting (TBS, TNN, and CNN). Partial ownership was acquired in BET, Showtime and the Movie Channel, the Discovery Channel, Think Entertainment, and American Movie Classics. As the company also sought growth opportunities outside the cable tv industry, TCI organized as a holding company of three companies, each selling its own stock:

TCI Group is the subsidiary housing the firm's original cable systems, whose 14 million subscribers place TCI ahead of Time Warner as the #1 US cable operator.

Liberty Media oversees TCI's financial investment in over 90 cable networks, including CNN and Discovery, TCI Music, DMX (a 24-hour commercial-free music station distributed via

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cable TV, satellite, and custom CDs), The Box Worldwide (interactive music video channel), and Paradigm Music Entertainment (web site and record label).

TCI Ventures encompasses everything else, including international cable operations and telephony, Internet, satellite, and national digital video services interests. TCI's investments include stakes in PRIMESTAR and international cable operations and related ventures.

TCI in 1980 reported sales of $124 million and in 1996 had sales of $8,022 million, maintaining its high rate or annual growth.

RISKS ASSOCIATED WITH PRODUCT DIVERSIFICATION Diversification is the riskiest of the four strategies presented in the Ansoff matrix and

requires the most careful investigation. Going into an unknown market with an unfamiliar

product offering means a lack of experience in the new skills and techniques required.

Therefore, the company puts itself in a great uncertainty. Moreover, diversification might

necessitate significant expanding of human and financial resources, which may detracts

focus, commitment and sustained investments in the core industries. Therefore a firm

should choose this option only when the current product or current market orientation does

not offer further opportunities for growth.

The main dangers facing a company following a product diversification strategy for a brand

are that it could fail to adequately understand the new customer base and that any new

brand name may result in loss of meaning for the original brand and/or cannibalization of

the original brand, particularly if it is a brand extension.

The risk of not understanding the new customer base is present as it is with market

development. And the risks of loss of meaning and/or cannibalization are just as significant

as with product development.

For every successful magazine like Teen People, however, there are many more that are

unsuccessful. All of the women's sports magazines failed, for example. The new market

(women) was not interested in the new product (new magazines with various titles) since—

unlike men—women did not want to read a magazine about sports without some link to

fitness. And the few who did buy the new magazines simply switched from the men's

versions.

In order to measure the chances of success, different tests can be done:

1. The attractiveness test: the industry that has been chosen has to be either attractive

or capable of being made attractive. 2. The cost-of-entry test: the cost of entry must not capitalize all future profits. 3. The better-off test: the new unit must either gain competitive advantage from its

link with the corporation or vice versa.

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Because of the high risks explained above, many companies attempting to diversify have led

to failure. However, there are a few good examples of successful diversification:

1. Virgin Media moved from music producing to travels and mobile phones

2. Walt Disney moved from producing animated movies to theme parks and vacation

properties

3. Canon diversified from a camera-making company into producing an entirely new

range of office equipment.

COMPANIES THAT HAVE SUCCESSFULLY DIVERSIFIED

Hindustan Unilever Limited (HUL) is a subsidiary of Unilever, one of the world’s leading suppliers of fast moving consumer goods with strong local roots in more than 100 countries across the globe with annual sales of about €40 billion in 2009 Unilever has about 52% shareholding in HUL.

Hindustan Unilever was recently rated among the top four companies globally in the list of “Global Top Companies for Leaders” by a study sponsored by Hewitt Associates, in partnership with Fortune magazine and the RBL Group. The company was ranked number one in the Asia-Pacific region and in India.

The mission that inspires HUL's more than 15,000 employees, including over 1,400 managers, is to help people feel good, look good and get more out of life with brands and services that are good for them and good for others. It is a mission HUL shares with its parent company, Unilever, which holds about 52 % of the equity.

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HUL believes that an organization’s worth is also in the service it renders to the community. HUL is focusing on health & hygiene education, women empowerment, and water management. It is also involved in education and rehabilitation of special or underprivileged children, care for the destitute and HIV-positive, and rural development. HUL has also responded in case of national calamities / adversities and contributes through various welfare measures, most recent being the village built by HUL in earthquake affected Gujarat, and relief & rehabilitation after the Tsunami caused devastation in South India.

The company has a distribution channel of 6.3 million outlets and owns 35 major Indian brands. Some of its brands include Kwality Wall's ice cream, Knorr soups & meal makers, Lifebuoy, Lux, Breeze, Liril, Rexona, Hamam and Moti soaps, Pureit water purifier, Lipton tea, Brooke Bond tea, Bru coffee, Pepsodent and Close Up toothpaste and brushes, and Surf, Rin and Wheel laundry detergents, Kissan squashes and jams, Annapurna salt and atta, Pond's talcs and creams, Vaseline lotions, Fair and Lovely creams, Lakmé beauty products, Clinic Plus, Clinic All Clear, Sunsilk and Dove shampoos, Vim dishwash, Ala bleach, Domex disinfectant, Rexona, Modern Bread, and Axe deosprays.

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Tata companies operate in seven business sectors: communications and information technology, engineering, materials, services, energy, consumer products and chemicals. They are, by and large, based in India and have significant international operations. The total revenue of Tata companies, taken together, was $70.8 billion (around Rs325,334 crore) in 2008-09, with 64.8 per cent of this coming from business outside India, and they employ around 363,039 people worldwide. The Tata name has been respected in India for 140 years for its adherence to strong values and business ethics.

Every Tata company or enterprise operates independently. Each of these companies has its own board of directors and shareholders, to whom it is answerable. There are 28 publicly listed Tata enterprises and they have a combined market capitalization of some $60 billion, and a shareholder base of 3.5 million. The major Tata companies are Tata Steel, Tata Motors, Tata Consultancy Services (TCS), Tata Power, Tata Chemicals, Tata Tea, Indian Hotels and Tata Communications.

TATAS IN ASIA PACIFIC

INDIAN SUBCONTINEN

T

SOUTH EAST ASIA

EAST ASIA

AUSTRALIA

Taj Hotels Resorts and

Palaces

NatSteel Corus Tata Communicatio

ns

Tata Communicatio

ns

Tata Communicatio

ns

Tata AutoComp

Tata Interactive

Systems

Tata Motors Tata Consultancy

Tata Communicatio

Taj Hotels Resorts and

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Services ns Palaces

Tata Steel Tata Motors Tata Motors Tetley Group

Tata Tea Tata Precision Industries

Tata Steel Tata Steel

Tetley Group Tata Steel Tata Tea Tata Motors

Tata Consultancy

Services

Tata Technologies

Tata Consultancy

Services

Tata Consultancy

Services

TATAS IN EUROPE

TATA COMPANIES

BRUNNER MOND JAGUAR LAND ROVER TAJ HOTEL RESORTS AND PALACES TATA AUTOCOMP TATA COMMUNICATIONS TATA CONSULTANCY SERVICES TATA INTERACTIVE TATA AG TATA MOTORS TATA TECHNOLOGIES TETLEY GROUP

TATAS IN CHINA

TATA COMPANIES CORUS

TATA AUTOCOMP

TATA COMMUNICATIONS TATA CONSULTANCY SERVICES TATA STEEL TATA TEA

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United Breweries Group or UB Group, based in Bangalore, is a conglomerate of different

companies with a major focus on the brewery (beer) and alcoholic beverages industry. The

company markets most of its beer under the Kingfisher brand and has also launched

Kingfisher Airlines, an airline service in India, with international flights operating recently.

United Breweries is India's largest producer of beer with a market share of around 48% by

volume.

The main businesses of the UB Group include:

Beverage alcohol

Aviation

BEVERAGE ALCOHOL The UB Group’s diverse range of product in this sector revolves

around 3 major segment, i.e. spirits, wines, and beers.

SPIRITS The main offerings in this segment are given below:

1. Whisky: Royal Challenge, Jura, Dalmore, Whyte & Mackay, Black Dog whisky,

Antiquity rare, Antiquity blue, Signature, McDowell's No.1, McDowell's No.1

Platinum, Bagpiper, Bagpiper Gold, Director’s Special, Old Tavern, McDowell’s Green

Label, DSP Black.

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2. Rum: Celebration Rum, Old Cask Rum, Old Adventurer Rum

3. Gin: Blue Riband

4. Brandy: Honey Bee, McDowell’s No.1, John Ex-Shaw

KINGFISHER WINES These include:

1. Bouvet Ladubay

2. Four Seasons

3. Bohemia

BEERS These include the following:

Kingfisher Blue - Premium Beer, Kingfisher Red, Kingfisher Strong - Strong Beer, Kingfisher

Premium - Mild Bee, Kingfisher Ultra, Kingfisher Draught, London Pilsner, Zingaro, Sand

Piper, UB Premium Ice, Kalyani Black Label Premium, Kalyani Black Label Strong.

AVIATION Kingfisher Airlines is one of six airlines in the world to have a 5-star rating from

Skytrax, along with Asiana Airlines, Cathay Pacific, Malaysia Airlines, Qatar Airways and

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Singapore Airlines. Kingfisher operates more than 375 daily flights to 71 destinations, with

regional and long-haul international services. In May 2009, Kingfisher Airlines carried more

than a million passengers, giving it the highest market share among airlines in India.

There are two main services offered: Kingfisher Airlines and Kingfisher Red.

KINGFISHER AIRLINES Kingfisher Airlines serves 63 domestic destinations and 8

international destinations in 8 countries across Asia and Europe. Kingfisher's short haul

routes are mostly domestic apart from some cities in South Asia, Southeast Asia and

Western Asia. All short haul routes are operated on the Airbus A320 family aircraft. ATR 42s

and ATR 72s are used mainly on domestic regional routes.

Kingfisher has its medium, long-haul destinations in East Asia, Southeast Asia, and Europe.

Its first long haul destination was London, England which was launched in September 2008.

It has plans to launch new long haul flights to cities in Africa, Asia, Europe, North America

and Oceania with deliveries of new aircraft. All long haul routes are operated on the Airbus

A330-200.

KINGFISHER RED Formerly known as Air Deccan, the airline was previously operated by

Deccan Aviation. It was started by Captain G. R. Gopinath and its first flight took off on 23

August 2003 from Hyderabad to Vijaywada. It was known popularly as the common man's

airline, with is logo showing two palms joined together to signify a bird flying.

In October 2007, after the acquisition by Kingfisher Airlines, Air Deccan was renamed "Simplifly

Deccan" with its new tagline being "The choice is simple". The old logo was replaced by the

Kingfisher logo and the same font of Kingfisher Airlines was also used on Simplifly Deccan. The old

yellow and blue colors of Air Deccan were replaced by Kingfisher Airlines's red and white,

supposedly to give the same premium look and feel to Deccan as well.

The new look airline also promised excellent on-time performance, a wider network and "little

delights all the way". Check-in staff would no longer be outsourced, but managed by the airline's

own employees, thereby "increasing accountability and improving service delivery," said Mr Mallya.

He also announced that the new airline would slowly phase out the ageing ATR 42 and A320 planes

and replace them with entirely new aircraft.

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CONCLUSIONS FROM RESEARCH As is evident from the examples (HUL,

Tata Group, ITC Ltd., and UB Group) given above, we see that these companies pursued

diversification very aggressively and offered a multitude of products to consumers.

Further, increased competition leading to an erosion of market share has forced

companies not only to improve existing products but also to diversify their product range

so as to stay on top of the competition. I addition, a large and diversified product range

greatly increases the probability of a consumer to pick your brand (say in a supermarket).

So the formulated hypothesis is valid according to the examples

taken and it is diversification that leads a company towards long-

term growth and development

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