Management of Diversification in the Public Sector

Public sector enterprises account for a very substantial proportion of the manufacturing activity in India. Public enterprises (PEs) in India are rapidly diversifying their businesses as a response to environmental changes as well as to achieve their growth, profitability and other strategic objectives. Hence, management of diversification has emerged as a major task of PEs. Most PEs are diversifying into related and technologically sophisticated fields ; unrelated diversification is not very uncommon. Based on research done by the authors the pertinent studies by others, three modes of growth and diversification have been conceptualised. The more effective modes amongst them have been identified and the conditions facilitating successful diversification have been delineated. Diversification creates the need for major changes in organizational structure, systems, and management processes. Some of the problems of transition from a single business to multiple product lines have been highlighted. Finally, this paper sketches out major steps in planning a diversification move in the public sector in India.