CORE BUSINESSCORE BUSINESS

VSVS

DIVERSIFIED BUSINESSDIVERSIFIED BUSINESS

Core BusinessCore BusinessVsVs

Diversified BusinessDiversified Business

Core BusinessCore Business The The core businesscore business of an organization is an of an organization is an

idealized construct intended to express that idealized construct intended to express that organization's "main" or "essential" activity organization's "main" or "essential" activity

The central, and usually the original, focus of The central, and usually the original, focus of an organization's activities that differentiates an organization's activities that differentiates it from others and makes a vital contribution it from others and makes a vital contribution to its success to its success

The concept of core business became The concept of core business became prominent in the 1980sprominent in the 1980s

In 1982, Tom Peters's and Robert Waterman's In 1982, Tom Peters's and Robert Waterman's book In Search of Excellence suggested that book In Search of Excellence suggested that organizations should stick to the knitting and organizations should stick to the knitting and avoid diversifying into areas beyond their field avoid diversifying into areas beyond their field of expertise. of expertise.

Pros and Cons of core Pros and Cons of core businessbusiness

AdvantagesAdvantages Focus is defined.Focus is defined. Clear identity.Clear identity. Bring innovations in their respective Bring innovations in their respective

fields.fields.

DisadvantagesDisadvantages riskrisk

Examples of Core Examples of Core businessbusiness

Maruti Udyog Ltd.Maruti Udyog Ltd. Incorporated-February 1981Incorporated-February 1981 Joint Venture-October 1982Joint Venture-October 1982 Facilities - Gurgaon: 3 vehicle assembly Facilities - Gurgaon: 3 vehicle assembly

plantsplantsManesar: 1 vehicle assembly plantManesar: 1 vehicle assembly plantHead Office in New Delhi, IndiaHead Office in New Delhi, IndiaRegional offices: 16 Regional offices: 16

Employees-4993 of Financial year 2006-07 Employees-4993 of Financial year 2006-07 Maruti assembles different models of cars Maruti assembles different models of cars

for different segments.for different segments.

11 Models of Maruti11 Models of Maruti

InfosysInfosys

• Infosys Technologies Ltd. (NASDAQ: INFY) was Infosys Technologies Ltd. (NASDAQ: INFY) was started in 1981 by seven people with US$ 250. started in 1981 by seven people with US$ 250.

• Today, we are a global leader in the "next Today, we are a global leader in the "next generation" of IT and consulting with revenues generation" of IT and consulting with revenues of over US$ 3 billion. of over US$ 3 billion.

• Infosys defines, designs and delivers Infosys defines, designs and delivers technology-enabled business solutions that technology-enabled business solutions that help companies globally. help companies globally.

Infosys Continued…..Infosys Continued…..

• Infosys also provides a complete range of Infosys also provides a complete range of services by leveraging our domain and services by leveraging our domain and business expertise and strategic alliances business expertise and strategic alliances with leading technology providers. with leading technology providers.

• Infosys takes pride in building strategic Infosys takes pride in building strategic long-term client relationships. Over 95% of long-term client relationships. Over 95% of our revenues come from existing our revenues come from existing customers.customers.

Arcelor MittalArcelor Mittal

The world's number one steel The world's number one steel company, with 310,000 employees in company, with 310,000 employees in more than 60 countries. more than 60 countries.

Revenues of US$ 105.2 billion, with a crude steel production of 116 million tonnes.

Products and Services of Arcelor MittalProducts and Services of Arcelor Mittal

Tubular servicesTubular servicesStainless steel Stainless steel WireWireAutomotive Automotive Construction MaterialConstruction MaterialDistributionDistributionSteel Services CentersSteel Services Centers

Domino’s

Domino's Pizza India Ltd. was incorporated in March 1995 as the master franchisee for India and Nepal, of Domino's Pizza International Inc., of USA.

Domino's Pizza India Ltd. has proceeded to become one of the largest and fastest growing international food chains in South Asia.

First Domino's Pizza store in India opened in January 1996, at

New Delhi.

Presently over 165 outlets in 33 cities and is the leader in the fast food delivery segment.

Customers can order their pizzas by calling a single countrywide

Hunger Helpline - 1800-111-123.

Dominos continued..

Domino's vision is focused on " Exceptional people on a mission to be the best pizza delivery company in the world!".

Domino's is committed to bringing fun and excitement to the lives of our customers by delivering delicious pizzas to their doorstep in 30 minutes or less.

Domino's believes strongly in the strategy of 'Think local and act regional' that is subtly blended with a playful images personified by its ' Hungry Kya? ' positioning.

Time and again Domino's has been innovating toppings suitable to the taste buds of the local populace and these have been very well accepted by the Indian market.   

Diversified BusinessDiversified Business

MeaningMeaning

Business that operates in more than Business that operates in more than one industry or market, and uses one industry or market, and uses different distribution channels as a different distribution channels as a matter of corporate strategy.matter of corporate strategy.

A company may attempt to A company may attempt to manufacture the products itself, or it manufacture the products itself, or it may acquire or merge with an may acquire or merge with an ongoing organization. ongoing organization.

Diversified BusinessDiversified Business

Why Diversification?Why Diversification?The two principal objectives of diversification are The two principal objectives of diversification are improving core process execution, and/or improving core process execution, and/or enhancing a business unit's structural position enhancing a business unit's structural position

Forms and Means of DiversificationForms and Means of DiversificationDiversification typically takes one of three forms:Diversification typically takes one of three forms: Vertical integration - along your value chain Vertical integration - along your value chain Horizontal diversification - moving into new Horizontal diversification - moving into new

industry industry Geographical diversification - to open up new Geographical diversification - to open up new

markets markets

History of diversificationHistory of diversification Diversification strategies play a major role in the Diversification strategies play a major role in the

behaviour of large firms. A sequence of behaviour of large firms. A sequence of diversification followed by restructuring has been diversification followed by restructuring has been common in countries such as Australia, USA, UK common in countries such as Australia, USA, UK and Germanyand Germany

In the Fortune 500 US industrial companies, the In the Fortune 500 US industrial companies, the proportion that generated more than 25% of their proportion that generated more than 25% of their revenues from diversified activities increased revenues from diversified activities increased during the 1950s, 1960s and early 1970s, but then during the 1950s, 1960s and early 1970s, but then fell off again during the 1980sfell off again during the 1980s Fortune 500 companies with >25% revenues from Fortune 500 companies with >25% revenues from

diversified activitiesdiversified activities 1950 38%1950 38% 1974 63%1974 63% 1988 47%1988 47%

Firms Vary by Degree of Firms Vary by Degree of DiversificationDiversification

Single-business > 95% of revenues from a single business unit

Low Levels of Diversification

AAAA

Dominant-business Between 70% & 95% of revenues from a single business unit BBBBAAAA

Unrelated-Diversified Business units not closely related High Levels of Diversification AAAA

BBBB CCCC

Moderate to High Levels of Diversification< 70% of revenues from dominant business; technological & distribution links

Related constrained

Related linked (mixed) < 70% of revenues from dominant business, only limited links exist

AAAA

BBBB CCCC

BBBB

AAAA

CCCC

Eg DLF

Eg UB

Eg Hero Group

Eg Tata Group

Pros and cons of diversified Pros and cons of diversified businessbusiness

AdvantagesAdvantages Spreading riskSpreading risk Increased opportunityIncreased opportunity Market power (growth)Market power (growth) Surety about long term existenceSurety about long term existence Sharing of resources e.g. labsSharing of resources e.g. labsDisadvantagesDisadvantages ComplexityComplexity New business can be over valuedNew business can be over valued

Examples of Diversified Examples of Diversified BusinessBusiness

DLFDLF

The group has over 224 million sq. ft. of The group has over 224 million sq. ft. of existing development and 748 million sq. ft. of existing development and 748 million sq. ft. of planned projects. planned projects.

The company has also entered into several The company has also entered into several strategic alliances with global industry leadersstrategic alliances with global industry leaders

The business traditionally has been into three The business traditionally has been into three prime divisions: Homes, Offices and prime divisions: Homes, Offices and Shopping Malls. To these DLF has added Shopping Malls. To these DLF has added three more divisions: Hotels, Infrastructure three more divisions: Hotels, Infrastructure and SEZs and SEZs

Key business of DLFKey business of DLF Airport ModernizationAirport Modernization

Township DevelopmentTownship Development

HospitalityHospitality

IT InfrastructureIT Infrastructure

Asset ManagementAsset Management

UB GroupUB Group

United Breweries Group—popularly known United Breweries Group—popularly known Kingfisher groupKingfisher group

The UB Group (United Breweries) Group is a The UB Group (United Breweries) Group is a multi-faceted conglomerate with business multi-faceted conglomerate with business interests in interests in

Beverage Alcohol-Bagpiper, McDowels, Beverage Alcohol-Bagpiper, McDowels, Pharmaceuticals-Aventis Pharma Limited , Pharmaceuticals-Aventis Pharma Limited , Media-Asian Age Holdings Ltd, Media-Asian Age Holdings Ltd, Aviation-Kingfisher Airlines Limited , Aviation-Kingfisher Airlines Limited , Fertilizer-Mangalore Chemicals & Fertilizers Fertilizer-Mangalore Chemicals & Fertilizers

Limited , Limited , Research & Development-Vittal Mallya Research & Development-Vittal Mallya

Scientific Research Foundation Scientific Research Foundation

Tata GroupTata Group 98 operating companies in seven sectors98 operating companies in seven sectors Group was founded by Jamsetji Tata in the mid 19th Group was founded by Jamsetji Tata in the mid 19th

century, century, The Tata Group is one of India's largest and most The Tata Group is one of India's largest and most

respected business conglomerates, with revenues in respected business conglomerates, with revenues in 2006-07 of $28.8 billion (Rs129,994 crore), the 2006-07 of $28.8 billion (Rs129,994 crore), the equivalent of about 3.2 per cent of the country's GDP equivalent of about 3.2 per cent of the country's GDP

The Tata family of companies shares a set of five core The Tata family of companies shares a set of five core values: integrity, understanding, excellence, unity and values: integrity, understanding, excellence, unity and responsibility. responsibility.

The Tata Group has operations in more than 80 The Tata Group has operations in more than 80 countries across six continents, and its companies countries across six continents, and its companies export products and services to 85 countries. export products and services to 85 countries.

Major CompaniesMajor Companies

TCS- software firmTCS- software firm TISCO- iron and steel firmTISCO- iron and steel firm Tata telecommunicationsTata telecommunications Tata tea Inc-major brands are Tata Tea, Tata tea Inc-major brands are Tata Tea,

Tetley Tea etcTetley Tea etc Tata Motors- Indica, Indigo, NanoTata Motors- Indica, Indigo, Nano Tata Construction Equipment companyTata Construction Equipment company

Reliance ADAGroupReliance ADAGroup

Among India’s top three private sector Among India’s top three private sector businessbusiness

Across different companies, the group has Across different companies, the group has a customer base of over 100 million, the a customer base of over 100 million, the largest in India largest in India

a shareholder base of over 12 million, a shareholder base of over 12 million, among the largest in the world. among the largest in the world.

Through its products and services, the Through its products and services, the Reliance - ADA Group touches the life of 1 Reliance - ADA Group touches the life of 1 in 10 Indians every single day. in 10 Indians every single day.

RelianceADAG companiesRelianceADAG companies

Reliance Capital-interests in asset Reliance Capital-interests in asset management and mutual funds, life and management and mutual funds, life and general insurance, private equity and general insurance, private equity and proprietary investments, stock broking proprietary investments, stock broking

Reliance Communications Limited Reliance Communications Limited Reliance Energy Limited-generation of Reliance Energy Limited-generation of

electricityelectricity Reliance Health Reliance Health Reliance Media & Entertainment-ADLABS, Reliance Media & Entertainment-ADLABS,

BigFM, Mobile TV, DTHBigFM, Mobile TV, DTH

Comparison w.r.t. Comparison w.r.t. businessesbusinesses

US economy is heading towards core US economy is heading towards core businessbusiness

Indian economy is heading towards Indian economy is heading towards diversified businessdiversified business

ReasonsReasons

Collectivism in Indian economy Collectivism in Indian economy Opportunities in India are moreOpportunities in India are more US Economy is stagnant and India is US Economy is stagnant and India is

developing economydeveloping economy More and more companies want to More and more companies want to

come to Indiacome to India CompetitionCompetition

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