The Hindu Business Line : `Core competence crucial for diversification'

MR NEERAJ SANGHI, Chief Executive Officer of South Asia LPG Pvt Ltd, explains to students of Samata College in Visakhapatnam the concept of diversification in business on Monday. The lecture was organised by the Hindu Business Line Club. - K.R. Deepak

Visakhapatnam , Dec. 4

Diversification is a route many businesses take after achieving a certain amount of success in a particular field, but one which is fraught with peril, if the core competence is ignored, or lost sight of, in the process, according to Mr Neeraj Sanghi, the Chief Executive Officer of the South Asia LPG Private Ltd.

He was addressing the management students of Samata College in the MVP colony here on Monday. The lecture - `Diversification - A corporate level strategy' - was organised by The Hindu Business Line Club.

Crucial role

He said that in many countries tax laws, anti-monopoly legislation and other factors make it necessary for many businesses to diversify, "but diversification for the sake of diversification is never desirable. It cannot be recommended."

He told the students that diversification could be into related areas, or unrelated areas, but at all times and costs the core competence of a company plays a crucial role.

"Take the example of Enron. They were diversifying left, right and centre, which is a sure prescription for disaster," he said.

He said the western experience had proved conclusively that "conglomerates could never succeed on a long-term basis, but there may be exceptions in developing countries." He cited the example of the Tata group.

`NO RECIPE'

He concluded that there could never be a recipe for diversification, but a strategy based on the core competence of the company would be a safe bet.

"Core competence is very much an Indian concept, one which has been popularised by Mr Prahlad," he said, citing a verse from the Bhagavad Gita.

Mr T.V Suresh, Regional General Manager of The Hindu, welcomed the gathering and gave a brief sketch of the launching of the Business Line in the early nineties and its emergence as the second largest circulated business daily in the country in a short span of time.

The Director of the college, Prof B.V. Ramalingeswara Rao, participated in the programme.

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