DIVERSIFICATION involves a business moving into an additional area of activity.

This can be either a new

product in an existing market, for example an airline starting a low-cost service or a new product in different
market, for example a bus operator buying a rail franchise and running train services. Diversification can be
achieved with partners, as well as through new finance, and can provide several benefits. In addition, it can
provide new opportunities for existing skills as well as spare capacities. For example, an advertising agency
may set up a unit to make corporate videos because it has the necessary skills and resources. This is known
as concentric diversification because it is based on existing skills, customers and sales channels but the
application broaden in concentric rings.
SPECIALIZATION the opposite of diversification, it involves dropping noncore activities or even redefining
and focusing on core operations. The main advantages are a clear focus and strength in depth, with all
available resources channeled into one endeavor. It also means that any cash available from the sale of
noncore operation can be used to grow the business. Reliance on specialization requires doing what you do
sufficiently better than your competitors and successfully anticipating and adapting to market changes.

BALANCING CORE AND CONTEXT core activities are the unique skills that differentiate an organization from
its competitors and persuade customers of its superiority. Context activities are the processes needed to
meet the industry standard without surpassing it. Getting the right balance between the two is surprisingly
tricky. Core activities are known as business idea factors, while context activities refer to hygiene factors –
those essential to the success of any business. For example, a core activity of Microsoft might be its ability
to develop new software, whereas context factors include its ability to process orders and dispatch products.
Both are crucial, but real value of the business lies in the core. Shareholders typically want to concentrate
on core activities as these generally increase share prices. But sometimes business become too involved in
context activities and lose focus on the core, which is where the potential growth and any competitive
advantage lies. When deciding how to best balance core and context: first be clear about what is core and
context. Recognize that some of these activities might be dynamic, moving between categories. Second, be
prepared to overcome possible resistance to outsourcing initiatives and rearranging manager’s
responsibilities. Third, delegate core activities from senior managers to middle agers as they will have a
better view of market trends. Delegating responsibility helps ensure that no level within the organization
become overwhelmed. And lastly, encourage top level support for outsourcing and managing context
activities.
THE PERILS OF GROWTH Growth is difficult to manage and depends on having a clear objective, the
necessary cash and capable leadership. Because of the time lag between making an investment and it
starting to repay, it is crucial to maintain the support of financial backers. Growth can disrupt existing
processes, organizational structures and working methods. If growing pains are not remedied quickly, they
can have serious consequences. The solution is to identify all those things about the current business that
work well and must be retained, as well as what needs improving. Explaining plans to customers and
suppliers help to allay the concerns. Cost control is crucial in a strategy for growth. Rising cost, most
frequently administration costs, occur if there is duplication or if the administrative function is badly
managed. Another reason for rising costs is too much stock. Depending on its speed and scale, growth will
affect everything from innovation to decision-making and team-building, so employees may need additional
training and support. Integrating workforces with broadly similar roles but large differentials in pay and
conditions may prove difficult.
CURRENT ISSUES AND CONCERNS AFFECTING BUSINESS STRATEGY although perennial issues continue to
affect business strategy, there are often, far-reaching developments that shape the context in which
businesses operate and have implications for business strategy.
a. CORE COMPETENCE AND CAPABILITIES. Organic growth depends largely on what an organization is good
at and capable of. It is helped by identifying and exploiting synergies across different parts of an
organizations activities: by structuring the organization to take advantage of priority opportunities; and by
creating culture that is able to spot opportunities when they arise and make the most of them.
b. PLANNING Growth can be achieved quickly and unexpectedly, but for it to be sustained a coordinated
plan of action is needed among business functions such as marketing, production, finance and human
resources. Organic growth gives an organization total control over the process of development and relies on
the experience within the firm.
TYPES OF CONTROLS

1. Preventive Controls – these controls establish benchmarks of expected performance

2. Feedback Controls – these are generated by measuring actual performance and comparing it with the
expected performance. They represent the monitoring mechanisms used by consulting firm to maintain
control over engagement schedules and internal administrative operations, as well as activities related to
competence and service equality.

To ensure the maintenance of sound controls over competence and quality of services of the consulting
firm, the following steps may be taken:
1. Service Review Annual service review should be conducted for the purpose of assessing the consulting
firm’s objectives, offered services and record of competence in the provision of service since the last
review.

2. Appoint Practice Director A person designated as practice director should be appointed in order to establish
responsibility for practice competence and quality control. This person should also

a. Propose practice goals and supervise the overall service planning process.
b. Be responsible for practice conduct.

3. Appoint Service Coordinator In addition to the practice director, a service coordinator should be appointed to
administer daily operations related to the provision of management and consulting services. Among the
responsibilities of this position in relation to the competent delivery services are

a. Assign appropriate staff consultants to engagement after consultation with managers-in-charge

b. Obtain positive evidence that the delivery of services on each engagement is in accordance with firm
policies.
c. Pinpoint and report knowledge or skill deficiencies and recommend staff development steps to correct
them.
d. Coordinate all practice development activities, including the screening of prospective engagements.
e. Devise and administer a plan of staff training, consisting of both on-the-job and formal training courses.

4. Perform Engagement Analysis A record of all engagements even those that were very small or for which no fees
were collected should be kept by the consultancy firm. The ff. information with respect to each engagement should
be recorded for future reference and/or reporting:

1. Client, including name, address, service location(s), client control, referral (if applicable)
2. Engagement service classification code
3. Other engagement with this client
4. Staff consultant who were assigned to each engagement, their tasks and hours spent on each tasks
5. Total engagement hours, billed as well as those not billed (including explanation)
6. Summary of other costs
7. Closing date
8. Engagement evaluation and recommended follow-up

This information can be useful in providing guidance during planning and operational activities. It would be
preference to maintain a computer managed file so that it can be easily and quickly rearranged, searched and
accessed. It should also be reviewed periodically to update the database and if necessary weed out information that
is no longer relevant and current.
Perform Staff Competence Evaluation An evaluation of the competence and related attributes of staff consultants,
managers and partners should be done at least annually. In the case of staff consultants, the evaluation should take
place more often – at the end of engagement (or at milestones if the engagements are lengthy) during the first year
and semiannually during the succeeding years. The procedure and content of staff competence evaluations will vary
from firm to firm and among staff levels. However, there are certain steps that are common to all evaluations. These
are

1. The evaluator should study the ff. pertaining to the staff members being evaluated:
a. Personal file
b. File of engagement participation
c. File of competence and experience
2. The evaluator should make a certain that the engagement file fully reflects all information concerning all
engagements in which the staff member participated.
3. The evaluator should complete a competency evaluation checklist
4. The evaluator should meet personally with the staff members to discuss the evaluation itself.