Related and Unrelated Business Diversification

1. In the case of the related diversification strategy, the value for the stakeholders can be enhanced in different ways. One of the major ways is the utilizing the access capacity with the organization. This is due to the reason that in the case of the related diversification, same assets can be used for the new sector. Thus, the unused assets can be further used and it will gain value for the internal stakeholders such as the employees and the managers. They will have more growth and job opportunities (Boschma & Capone, 2015). In addition, economies of the scale will also get increased, which will reduce the price of the products and will benefit the external stakeholders such as the customers. In addition, the skills of the internal stakeholders can also be increased by the means of shared skills between the old and new sectors. The skills possessed by the employees in the old sector will get further exposure due to the diversification in related business (Neffke & Henning, 2013).

In the case of the unrelated diversification, the stakeholder value can be enhanced by the means of having higher return on investments and profitability. This is due to the reason that in the case of the unrelated diversification, business sectors with having higher potentiality are being chosen. Thus, the internal stakeholders including the shareholders are having better opportunity to have more returns from this strategy (Kumar, 2013). From the perspective of the customers, brand loyalty can be maintained and extended in the case of unrelated diversification. This is due to the reason that customers having loyalty for a particular brand can have the same access in another unrelated sector due to diversification. Thus, value for the stakeholders can be enhanced from both related and unrelated diversification.

In having the sustainable approach, there are number of factors should be considered. One of the major factors is the maintaining differential elements between the new and old sector. In the case of the related diversification, the same assets will provide value for the stakeholders only when the end products will be differentiated. In majority of the cases, the production of similar offerings derails the sustainable approach of value creation for the stakeholders. Thus, it should be checked about how differentiated is the new business from the old business even after sharing the same assets (Purkayastha, 2013). Increase in the economies of scale will enhance the value for the external stakeholders but it should be noted that increase in only economies of scale will not reduce the average cost if the sales volume is also getting higher. Thus, in order to have sustainable approach, determination of the sales potential should be done. Reduction in the sales volume will affect the effectiveness of the economies of scale and this will reduce the value for the stakeholders also.

2. The major factors to be considered in calculating the industry attractiveness are long term growth potentiality, size of the industry, demand in the market and lifecycle of the products. Long term growth potentiality is important due to the reason that there may have short term potentiality in an industry, which will not be sustainable in the long term and thus this industry cannot be considered as an attractive industry. Thus, it is important for the business organizations to determine the growth potentiality of the industry before entering in the market. In the case of Apple, they have entered the online song streaming market by determining its growth potentiality (Kokodey, 2013). They have been able to identify that online medium is the future of the song streaming and thus, thus successfully ventured in this market. Another factor is the size of the industry. This is also important due to the reason that size of the industry determines the potentiality. If the size of the industry is too small for the particular business organization then it will not be a viable option for them to consider it as an attractive industry. For instance, Tesla is not having their operations or presence in the South Asian countries due to the reason that market for the electric mobility in these regions is smaller for a brand like Tesla. They will not be able to gain economies of scale by operating in these smaller markets and with having lower volume of sales (Decuseara, 2013). Thus, it is important to determine the size of the industry before determining the industry attractiveness.

Sustainable Approach for Business Diversification

Another determining factor is demand in the market. This is also important due to the reason that the more will be the demand in the market, the more will be the potentiality and the more will be the attractiveness for the certain industries. For instance, For recently announced that it will axe their sedans and hatchbacks from their portfolio and instead will only focus on the trucks and SUVs. This shift in their strategic intent is mainly due to the demand in the market. It is identified by Ford that demands for sedans and hatchbacks of Ford are reducing in the American market and thus the industry attractiveness is also decreasing for them. This is due to the fact that if there is no demand for their smaller cars, then the potentiality for growth will also reduce and continuing the operation will cause loss. The last factor is the lifecycle of the products. This is important due to the reason that if the product is in the growth or introductory stage, then the potentiality will be more and if the product is in the maturity stage then the growth potentiality will be less (Gmelin & Seuring, 2014). Thus, it is important for the business organizations in determining the stage of their product in the product life cycle in determining the industry attractiveness. For instance, Samsung will not sell their feature phones anymore in the developed markets due to the reason they are in the declining stage and thus, their potentiality in the telecommunication industry of the developed market is less. However, on the other hand, they may continue the sale of their feature phone in the underdeveloped market because their product will be in the growth stage.

3. Ethics litmus test is one of the major tools being used in the workplace in determining the ethical standards and practices being followed in a decision making process. In terms of the decision matrix, it helps in maintaining the ethical behavior and prevents the probability of emergence of unethical practices. Thus, failure of the ethics litmus test will cause lack of filtration or evaluative measure in determining the ethical standards in the decision making process. In addition, it should be noted that failure of this tool will also conclude the particular decision to be taken will be unethical in nature and will have negative consequences (Feinberg, 2013). This is due to the reason that if the ethics litmus test is having a key five questions ranging from honesty to lawful duties, which should be checked. Thus, failure of the test will conclude that these questions are not being fulfilled, which will led to negative and adverse consequences.

One of the major drivers for the unethical behavior is the level of competition in the market. According to Bennett et al., (2013), the current competitive business scenario is motivating the organizations in initiating unethical practices. This is due to the reason that with the increase in the competition in the market, profitability of the organizations is being affected and thus unethical practices are being initiated to increase the profit. It is also being stated by the authors that unethical business practices are also being initiated to stay ahead of the competition. On the other hand, it is stated by Cohn, Fehr and Marechal (2014) that unethical business practices are also being initiated by the organizations to have short term gains over the long term potentiality. Majority of the contemporary business organizations are competing for gaining short term gains. This is pressurizing them to follow the unethical business practices for instant gains.

Factors for Calculating Industry Attractiveness

4. One of the major elements of the csr strategy is internal assessment. According to Arjalies and Mundy (2013), internal assessment is important to identify the gap areas of the existing csr strategy and the objectives to be achieved from it. Thus, effective internal assessment will help the business organizations in having an ideal csr strategy that will meet their objectives. However, the authors have also stated that internal assessment should be done in continuous manner and in accordance to the current business environments. It is also being stated by the authors that effective process of internal assessment will help in developing future strategic intent of csr strategy. Another element of csr strategy is embedding it in the company budget. According to Gazzola and Colombo (2014), csr policies will require a seamless funding option and thus it is important for the business organizations in aligning with their budget. This will ensure that developed strategies are being implemented properly and in right time. The next element is communication. According to Jamali, EI Dirani and Harwood (2015), it is important to communicate the csr policies to the employees in order to gain the feedback from then. Thus, the final draft should be modified in accordance to that. It is also being stated that without having the proper communication, employees may resist in the future in implementing the csr strategies.

The next element is training for the involved stakeholders. As per Vlachos et al., (2013), employees should be given training for carrying out the csr activities. This is also important in the strategy development due to the reason that success of the csr will depend on the effectiveness of the employees. Thus, according to the authors, if the employees are not trained enough in initiating the csr strategies, then the output will not be positive. The last element is evaluation and measurement. According to Costa & Menichini (2013), it is important to evaluate the performance of the csr activities to identify the shortcomings. This will help in developing the future strategy and initiating the rectification process.

Reference:

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