Business Finance
MGT 510 Saudi Electronic University Corporate Strategy for Diversification Paper

mgt 510

Saudi electronic university

MGT

Question Description

I don’t know how to handle this Management question and need guidance.

Critical Thinking: Corporate Strategy for Diversification (105 points)

Diversification strategies raise a wide range of strategic management issues. For this assignment, select a Saudi company whose strategy includes or included diversification and explore their motives, competitive advantage, and strategic planning based on the topics from Chapter 12 and the assigned reading.

1. Identify and provide company strategic details and consider what circumstances existed that motivated this company to diversify.

2. What mode of diversification did the company adopt?

3. How does this relate to their resources and capabilities? ( You have to mention the relationship between diversification decisions and a company’s resources and capabilities).

4. What are the benefits of diversification in this industry and how significant are they in the shape and growth of the industry?

5. What are the implications of the strategy chosen for the:

a- organizational structure,

b- management systems,

c- and allocation of decision making within the diversified firm?

Your well-written paper should meet the following requirements:

  • Be 6 to 7 pages in length, which does not include the title page or required reference page, which is never a part of the content minimum requirements. Use Saudi Electronic University academic writing standards and APA style guidelines.

  • *IMPORTANT NOTE: Please link your writing with the course material concepts, principles, and theories (chapter 12 page 279) such as ( diversification concept, resources and capabilities, and competitive advantage from diversification).

    Student has agreed that all tutoring, explanations, and answers provided by the tutor will be used to help in the learning process and in accordance with Studypool's honor code & terms of service.

    Final Answer

    Attached.

    Running head: CORPORATE STRATEGY FOR DIVERSIFICATION

    Corporate Strategy for Diversification
    Student’s Name
    Institution

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    CORPORATE STRATEGY FOR DIVERSIFICATION

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    Introduction
    Diversification strategies are employed to enlarge operations of companies through the
    addition of service, marketplaces, products, or phases of manufacturing to the prevailing
    business. Diversification aims to permit the corporate to join business lines that are diverse from
    prevailing trades. Once a new undertaking is tactically linked to the usual of trade lines, it is
    known as concentric diversification. Corporation diversification takes place once there is no
    shared line of tactical fit or relations between the new and old trade lines; the past and the new
    businesses are not related. Diversification is a kind of growth approach. It is one of the strategies
    pursued by corporates wanting to grow within more modern marketplaces and through
    introducing more recent products. Growth strategies entail a substantial surge in performance
    targets beyond past performance levels. A lot of corporates pursue one or more kinds of growth
    tactics. One of the main motives is the view held by a lot of investors and managers that "bigger
    is better." Increased in sales is often employed as a measure of performance. Although profits
    stay stable or decline, a surge in sales gratifies many folks. The assumption is frequently made
    that if sales rise, profits will ultimately follow. There are two extensive objectives of
    diversification. One of the goals is to guarantee that companies firms profit from diversification
    once their existing products and market segments are flooded, or rivals have outwitted them. The
    other objective is when companies employ the cash assets at their disposal to develop to be
    aggressive and join new markets as well as launch new products as a way of guaranteeing
    continued success and productivity. This paper looks to explore corporate diversification
    regarding Saudi Aramco Company.

    CORPORATE STRATEGY FOR DIVERSIFICATION

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    Identify and provide company strategic details and consider what circumstances existed
    that motivated this company to diversify.
    The selected company for this analysis is Saudi Aramco Company. The Saudi Aramco
    has used various strategies in its diversification approach. One of the methods used by the firm is
    a merger. The Saudi Aramco merged with SABIC stating that buying SABIC fits into the
    company’s long-term diversification strategy (Seznec, 2020). In 2018, Saudi Aramco asserted
    that it would merge with Saudi Arabian Basic Industries Company (SABIC) by acquiring 70
    percent of the firm from the Public Investment Fund (PIF). In 2019, Saudi Aramco announced
    that it had signed an official contract that cited the acquisition cost of $69.1 billion. Moreover,
    the company looks set to ramp up its attempts to privatize by making an initial private offering
    (IPO) on the Tadawul stock exchange in Riyadh. The long-anticipated and regularly-deferred
    IPO marks a keystone of the Vision 2030 diversification policy of the crown leader and existing
    ruler Muhammad bin Salman (GlobalData, 2019). It arrives at a moment when the cost of oil
    stays subdued because of the United States shale uprising; it may as well be impacted within the
    intermediate-term by renewable power evolutions and rising e-mobility. The listing of Saudi
    Aramco will increase the state’s plans to branch out from oil as the majority of earnings will be
    introduced in national projects. In contrast, the international thrill surrounding the contract will
    aid overseas appeal resources.
    Saudi Aramco is also spending $500 billion to branch out into natural gas as well as
    chemicals over the next ten years. The company which is the principal oil exporter targets to
    diversify its business by joining the expanding into the natural gas marketplace. From the
    investment, the firm will spend $160 billion into natural gas developments, while $100 billion
    will be used on chemical projects (Burnell, 2018). The natural gas demand is presently the

    CORPORATE STRATEGY FOR DIVERSIFICATION

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    quickest growing area within the Oil and Gas business, with abundant of that originating from
    the Far East. The state of Saudi Arabia is seeking to take advantage of this, and the firm’s tactics
    are to surge their gas production by 65 percent and start shipping it.
    What mode of diversification did the company adopt?
    There are various modes of diversification that Saudi Aramco Company used. The first
    mode of diversification used by the company is that of a merger. In 2019, the company signed a
    deal that announced an acquisition cost of $69.1 billion of SABIC (Seznec, 2020). The company
    announced that it would pursue more acquisitions to accelerate its growth in refining as well as
    petrochemicals as Saudi Arabia goes on with strategies to diversify its economy from
    dependence on sales of crude oil. Another mode of diversification adopted by the company is
    venturing into new markets. Saudi Aramco Company has joined the natural gas and chemicals
    industry. The company invested $500 billion to diversify into chemicals and natural gas (Burnell,
    2018). Aramco will devote half a trillion dollars over the subsequent ten years in natural...

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