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Unit 3: Business diversification

4 dot points, in syllabus order. Each dot point has a focused answer, with exam-style questions and worked answers where available.

Topic 1: Competitive markets and the rationale for diversification

Competitive markets - the structure of markets (perfect competition, monopolistic competition, oligopoly, monopoly); Porter's five forces (industry rivalry, bargaining power of suppliers, bargaining power of buyers, threat of new entrants, threat of substitutes); and the implications of competitive intensity for diversification

Competitive markets and Porter's five forces. Market structures, the five forces with Australian applications, and how competitive intensity drives the diversification decision, with worked examples from Australian supermarkets, banks and miners.

9 min read →

Topic 1: Strategies for growth and diversification

Growth and diversification strategies - the Ansoff matrix (market penetration, market development, product development, diversification), related and unrelated diversification, organic v inorganic growth (mergers, acquisitions, takeovers), and horizontal, vertical and conglomerate integration - and the risk-return profile of each

Growth and diversification. The Ansoff matrix, related v unrelated diversification, organic v inorganic growth, horizontal, vertical and conglomerate integration, and the risk-return trade-offs, with worked Australian examples from Wesfarmers, Coles and Telstra.

9 min read →

Topic 2: Entering global markets - using financial analysis for diversification decisions

Financial ratio analysis to inform diversification decisions - profitability ratios (gross profit, net profit, return on equity), liquidity ratios (current, quick), efficiency ratios (asset turnover, accounts receivable turnover) and gearing ratios (debt to equity); interpretation of ratios in context

Financial ratio analysis. The key profitability, liquidity, efficiency and gearing ratios, the formulas, the interpretation in context, and the use for diversification decisions, with worked calculations.

9 min read →

Topic 2: Entering global markets

Market entry strategies for global diversification - exporting (direct and indirect), licensing, franchising, joint venture, foreign direct investment (greenfield and acquisition) - and the risk-return profile of each

Global market entry. Exporting (direct/indirect), licensing, franchising, joint venture, foreign direct investment (greenfield and acquisition), the risk-return profile of each, and worked Australian examples from BHP, Cochlear, Atlassian and Bunnings.

9 min read →