Wednesday, March 31, 2010

Means of diversification

Means of diversification
The means of diversification can be:

a.Acquisition :It is organization taking over another operating organization through purchase of shares of ownership. The acquired organization generally keeps its separate identify.

b.Merger :It is one organization merging with another.Merger is combination of tow into one.It involves purchase of assets and liabilities.

c.Joint venture:Firms created and operated for the benefits of co-owners.It is a cooperative arrangement involving equity investment.Joint ventures are co-owned.

d.Strategic alliances :Cooperative arrangement without equity investment to contributed expertise or skills to a cooperative project.Licencing arrangement is an example.

d.Divestment :It is sale of a business to exit from the market.The reason can be.
  • Poor performance.Get rid of losers.
  • More value of assets in other uses.
  • Finance other acquisitions.
  • Finance ongoing operations.
e.Liquidation :The organization is sold in part to close down.

f.Corporate entrepreneurship :It refers to Establishment of new ventures within an existing organization.It is based on creativity and innovation.Internal sources of funds are used.It is also called entrepreneurship.

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