To What Extent Is Diversification the Best Strategy to Achieve Profitable Growth? Justify Your Answer with Reference to Novartis, Google and/or Other Organisations That You Know (40 Marks)

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Novartis, a large multinational pharmaceutical company, recently diversified by buying Alcon, in a £24.8 deal. Alcon is a producer of eye care products such as contact lenses. Google has diversified by investing £124 m in a wind power business. To what extent is diversification the best strategy to achieve profitable growth? Justify your answer with reference to Novartis, Google and/or other organisations that you know (40 marks) Diversification can be defined as the practice under which a firm enters an industry or market different from its core business. This shows relevance in regard to a company’s corporate strategy, as it is the change in the company’s direction of business. The company is wishing to diversify their methods whether that is the product, market or service. A business strategy is the means by which it sets out to achieve its objectives, it can be described as a long-term business planning. The definition would describe growth as the process of improving measures of an enterprise’s success. Business growth can be achieved either by boosting the revenue of the business with greater product sales or service income, or by increasing the profitability of the operation by minimising costs. Profitable growth can be achieved in many ways and strategic diversification has definitely played a large role in the growth of many large businesses today. However just like any strategy this all depends on many factors. For example, the type of industry the business is operating in or the risks involved into entering new markets. These strategies can be linked to The Ansoff Matrix also known as the Ansoff product and market growth matrix is a marketing planning tool which usually aids a business in determining its product and market growth. This is usually determined by focusing on whether the products are new or existing and whether the market is new or
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