Choosing a diversification project in a regulated economy

Choosing a diversification project in a regulated economy involves consideration of a large number of micro and macro issues. In order to make an optimal choice of strategy, a formal approach to diversification planning is necessary. This article develops an approach which aims at breaking up the problem of identification and selection of projects into manageable components. The approach involves three steps: identification of broad industry groups: identification of specific projects within each broad industry group; and comprehensive feasibility study. The major benefit of this approach lies in providing a systematic mechanism for reducing the number of alternatives and in recognizing the link between the internal management processes of strategy formulation with the political and administrative processes in government and regulatory bodies. The article is based largely on the Indian experience.