- 15 Marks
CSME – May 2019 – L2 – Q5 – Corporate Strategy Formulation
Explain diversification strategy and advise Shacks Limited on factors favoring concentric diversification.
Question
Shacks Limited is a company involved in the production of radio cassettes and photographic films. In the past two decades, the company had the greatest share of the market for these products. However, technological advancements resulting in the development of DVDs and digital photographs have greatly eroded the competitiveness of the company. To reposition Shacks Limited and make it more competitive, the management is considering concentric diversification as the strategy to pursue.
(a) Explain the term ‘diversification strategy’. (5 Marks)
(b) From the given scenario, advise the management of Shacks Limited on the key factors that indicate preference for concentric diversification strategy. (10 Marks)
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