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Word Count: 823
Diversification involves directions of development which take the organisation away from its present markets and its present products at the same time Johnson Scholes page 323 Diversification is traditionaly under two broad headings related and unrelated diversification Related diversification is developemt beyond the present product and market but still within the broad confines of the industry ie value chain in which a company operates Johnson Scholes page 323 Unrelated diversification is where the organisation moves beyond the confines of its current industry Johnson Scholes page 330Synergy is the most common reason for both related and unrelated diversification to happen Pottentialy synergy can happen when two or more products or services combine to complement each other to the extent that the two services added together have an effect that they become stronger that the sum of the two parts 225By moving backwards in intergration it becomes possible to have more control over your supplies coming in You can then decide on the quantity at which you require so if demand is slow then production can slow and vice versa As production would then be in-house cost can then be monitored more closely and savings can generaly be made without cutting corners The product could still be sold at the same price to make a greater profit of it could be sold at a cheaper price and become more competitive Some manufactures aquire there own distribution outlets to guarantee distribution this can be important for new competitors as often it can be hard to secure new distributors until the product has been tested for its sales potential Abu Garcia one of the worlds leading fishing tackle manufacture started out once this way before world war one and although they no longer have there own distribution points without them they may have never got where they have today Abu Garcia have there own alloy plant where the alloy is refined and pored directly into the moulds to produce
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