The strategy that is made by the parent firm is known as the headquarter level strategy.There are many barriers towards head quarter level control which include :-
Diversification Strategy– Sometimes the organizations continue with the business they are into without any changes, such type of strategy is known as concentration strategy or strategy of single market but, sometimes due to unavoidable situations or the external pressure the organizations try to make some changes in their product or services , such type of strategy is known as diversification strategy.
The eight synergy killers of the headquarter level strategy
- Inhibiting the corporate level strategy
- Clashes between the staff of the company eg. Personality clashes or cultural clashes
- Creating a sense of secrecy within the organization
- Difference in the incentives
- Pressure of performing
- Dominating top level management
- Lack of trust
The firms can get into two type of diversification strategy which are :-
1. Related Diversification, when diversification is done in a similar type of products or services.
2.Unrelated Diversification, when the company opt for entirely a new range of product or service
Some key benefits of Related diversification are as follows :-
- There can be economies of scale in the production
- Firm can gain more of the market power
- Competency in terms of knowledge
Related and unrelated global diversification
When the firms expand their roots across different countries ,that is its activities and processes but within a homogeneous set of countries it is known as related global diversification. Whereas when the firms disperse its activities across the heterogeneous set of countries it is known as unrelated global diversification.
Some benefits of global diversification are as follows :
- It increases the value of the shareholders
- Creates flexibility and the firm can easily respond to any type of changes
- It gains power and prestige for the top managers
Cost and risk of global diversification
- It is more complex to manage than the firms of the domestic country
- They do not yield high benefits due to inefficient cost utilization
- They can also reduce the value of the firm
Advantages of Vertical integration
- Vertical integration helps the firm to use the value chain of the other firms and thus helps in fighting with the competition.
- It helps the firms to input and output market to the competitors
- Reduces all the uncertainties associated with the demand and price of the product.