Diversification strategy in oil and gas companies
This article presents the concept of a company's strategy, its types as well as determines the circumstances when a firm or a company has to resort to diversification strategy. When choosing a strategy of diversification, the company produces several business areas, which form a diversified "portfolio" of an enterprise. The definition of the corporate strategy of a diversified company is given. Solutions of the diversification strategy under which a company ensures competition in the relevant markets are defined. The sequence of decision-making when choosing a diversification strategy is also described. Two vectors of objectives for different portfolios are defined. The process of strategy formulation is discussed as well. External efficiency reflects knowledge of the demands structure and the degree of their satisfaction (creation of new areas of business, business opportunities of a company and its potential). Internal efficiency reflects the state of an enterprise (cost effectiveness, use of capital, dynamics of productivity). In case of a strong competitive position and a high growth rate of the market, the company has several options for the behavior at its disposal, the best of which is he continued concentration on the single type of business. Later, when the growth in this market starts to slow down, it will be reasonable to think of diversification as a means of risk reduction and transfer of the company's accumulated knowledge and experience to some related industries.