Question

Although the related diversification strategy good for companies in developed countries, it is argued that the unrelated diversification strategy may be a better option in developing countries? Do you agree? Why?

Answer 1

Yes, I agree, as considering related diversification strategy, organization just does sharing their capabilities and skills and through this process, they want to achieve economies of scale in production, improve brand name with existing capabilities, improve service level, new products and R&D activities are exploited with existing skills. Hence, in developing countries, related diversification strategy considered as good practice.

We also need to understand that unrelated diversification strategy is more better option in developing country as it works on developing new skills and expertise, build new market and new products, restructure their organization as to fit new products and operations, all these could be better option in developing countries, as they can expect higher value of ROI, improve more cash flow, achieve better bargaining rate and gain competitive advantages. Hence, I agree that unrelated diversification strategy is better option in developing country.