Diversification
General Electric has long worked within a conglomerate structure that gives it a significant amount of diversification. The company breaks down its diversification in its annual reports. GE earned $148.6 billion in 2014, coming in the following segments:
The largest group is GE Capital, which itself has a high level of diversification:
The company's diversification approach is generally strong. First, GE has done this for decades and is therefore more familiar with running a conglomerate than most companies. There is a historical competitive advantage that comes with this. As one of the first conglomerates, GE has always been attractive as a place for the world's best executives, and it continues to draw in top level executive talent on account of this. Further, GE is fairly ruthless with respect to what businesses it wants to be in. The company explicitly states that they only want to operate in businesses where they think they…...
LVMH
Identification Evaluation of the main problems.
Sometimes, the best laid plans of mice and men go awry. The case of Bernard Arnault's involvement in LVMH is one of dazzling brilliance on one hand and intractable egotism on the other.
Arnault's stated strategy seems to make sense: acquire brands epitomizing the combination of classically tasteful luxury with forward-looking modernism. He looks for brands that are traditional in feel, but constantly renewing and reinventing themselves. However, some of his acquisitions for LVMH have seemingly deviated from this otherwise successful strategy. So, first of all, these deviations are problematic for the LVMH cachet.
Secondly, when even seemingly sensible acquisitions have failed to deliver value to the firm and its investors, Arnault has been reticent in divesting them. It is unclear why someone seemingly gifted with such business savvy would fail to unload an unprofitable, burdensome brand. This is an issue which needs explication.
However, during that time, the car sales industry was experiencing a recession and Virgin Cars was caught up in the midst of this recession. Therefore, even though through franchise agreements with manufacturers they could stock many cars without paying for them, car sales slumped considerably thus the company was not able to turn a profit.
Among the actions that could have been taken by Virgin Cars to make it successful was taking time to design the business plan and site their stores in order to make sure they gain the most competitive advantage. Secondly, by researching the car sales industry and profile the market before starting the business. By so doing, they would have been able to set more realistic expectations for car sales and device strategies to improve sales despite the recession.
Conclusion
Diversification as a strategy for business growth usually gives rise to successful companies. The strategy of diversification must…...
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References
Ansoff, I. (1957). Strategies for Diversification. Harvard Business Review, 35(5), 113-124.
Balmforth, J. (2009). Virgin Atlantic. London: Midland Publishing Limited.
Branson, R. (2006). Virgin Atlantic Airways. [Article]. Aviation Week & Space Technology, 165(13), 20-20.
Dominic, O.C. (2006). End of the road for Virgin Cars as Branson gets out, Sunday Times, the.
Annotated Bibliography on Value Creation Through Diversification
Glvan, A., Pindado, J., & De La Torre, C. (2014). Diversification: A value-creating or value-destroying strategy? Evidence from the Eurozone countries. Journal of Financial Management, Markets, and Institutions, 2(1), 43-64.
This research is aimed at showing the relationship between company value and product diversification strategy. The study digs deep into the types and levels of diversification to determine the real value addition that can be achieved using this strategy. The method used to calculate the benefits of diversification is regression, and the diversification measures used include the Revenue-based Herfindahl Index and Total Entropy. Other traditional variables that impact firms' value are also included in the function.
The study results showed that diversification impacts the firm's value, but a breakpoint marks the maximum benefits. Going beyond this point drops the value of the company. A more significant section of previous research is based outside the UK and US, and…...
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References
Glvan, A., Pindado, J., & De La Torre, C. (2014). Diversification: A value-creating or value-destroying strategy? Evidence from the Eurozone countries. Journal of Financial Management, Markets, and Institutions, 2(1), 43-64.Otero-Serrano, J. (2011). Does Firm Diversification Represent a Value Added for Stockholders? International Journal of Business and Finance Research, 5(4), 99-113.Schommer, M., Richter, A., & Karna, A. (2019). Does the diversification–firm performance relationship change over time? A meta?analytical review. Journal of Management Studies, 56(1), 270-298.Setianto, R. H. (2020). Corporate diversification and firms' value in an emerging economy: the role of growth opportunity. Journal of Asian Business and Economic Studies.
Diversification in Small and Medium Enterprises
Adjustment and enewal in the Aftermath of the Iraq War: A Case Study of Strategic and Functional Orientation for Diversification in a SME
In this chapter, discussion will further explore how National United Group's (NUG) location decisions and its position in an industrial cluster are critical to understanding its strategic orientation, and also the design, implementation, and outcome of its diversification strategies in the post Iraqi war period. The results of the study are discussed as they relate to the theoretical models and framework examined in the literature review. This section addresses the findings related to the fundamental questions asked of study participants, NUG managers and NUG employees, and the findings related to the examination of archival information.
The chapter discussion is organized according to the frameworks and theoretical models that were introduced in the literature review, and discussion explicitly refers to the questions asked of NUG…...
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References
1. Bagchi-Sen, Sharmistha and Kuechler, Linda. Strategic and Functional Orientation of Small and Medium Sized Enterprises in Professional Services: An Analysis of Public Accountancy. Service Industries Journal, July 2000, Vol. 20, 3, pp. 117-146.
2. Carter, Nancy M. Small Firm Adaptation: Responses of Physicians' Organizations to Regulatory and Competitive Uncertainty. Academy of Management Journal, June 1990, Vol 33, 2, pp. 307-333.
3. Chapman, Keith, MacKinnon, Danny and Cumbers, Andrew. Adjustment or renewal in regional clusters? A study of diversification amongst SMEs in the Aberdeen oil complex. Transactions of the Institute of British Geographers. September 2004, Vol. 29, 3, pp.382-396.
4. Morgan, Neil A., Kaleka, Anna and Katsikeas, Constantine S. Antecedents of Export Venture Performance: A Theoretical Model and Empirical Assessment. Journal of Marketing, Jan. 2004, Vol. 68, 1, pp. 90-108.
Diversification
How important is it for you to diversify your investment portfolio? How would you diversify your investment portfolio?
Although 'the stock market' is often spoken of as a collective entity, in reality it is made up of a many different types of industry subsets. Furthermore, stocks are not the only assets investors should have: bonds, CDs, and more conservative and risky investments make up the full 'buffet' of available ways to allocate funds. The right 'menu' of investments will vary depending upon the investor's age, comfort with risk, goals, and other factors. "To build a diversified portfolio, an investor should look for assets whose returns haven't historically moved in the same direction, and, ideally, assets whose returns move in the opposite direction. This way, even if a portion of your portfolio is declining, the rest of your portfolio is designed to be growing. Thus, you can potentially offset the impact of…...
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References
The pro's guide to diversification. (2013). Fidelity Investments. Retrieved from:
Companies and Diversification
Akpinar, O, and Yigit, I. (2016). The Relationship Between Diversification Strategy and Firm Performance in Developed and Emerging Economy Contexts: Evidence from Turkey, Italy And the Netherlands. Journal of Economic and Social Development, 3(2), 78-86.
This research encompassed a close look at data from 166 firms in the Netherlands, 265 firms in Italy, and 128 firms in Turkey (using data from 2007-2011). The point of the research was to explore the difference between various types of diversification and production performance in those three nations. Akpinar (professor, Kocaseli University in Kocaseli Turkey), and Yigit (business faculty member at Marmara University in Turkey) explain that "Related Diversification" is market expansion into new areas, and "Unrelated Diversification" is expansion into a new market "having no relation with the existing one" (Akpinar, et al., 2016).
The hypothesis used by the authors: there would be a positive relationship between "performance and related entropy index" vis-a-vis…...
Most critical is the ability to capitalize on core competencies while also alleviating any cultural conflicts inherent in pursuing any diversification strategy (Doving, Gooderham, 2008). Related diversifications are related to core competencies can be seen in many industry value chains, especially in the financial services industry (Milberg, 2008). As related diversifications reduce the cultural, system and process risk of a merger or acquisition, they have been proven empirically to be more successful in certain industries, especially financial services (Doving, Gooderham, 2008).
References
Erik Doving, aul N. Gooderham. (2008). Dynamic capabilities as antecedents of the scope of related diversification: the case of small firm accountancy practices. Strategic Management Journal, 29(8), 841. Retrieved August 6, 2008, from ABI/INFORM Global database. (Document ID: 1499091871).
atrick Marren (2007). High-functioning business strategy. The Journal of Business Strategy, 28(6), 37-39. Retrieved August 7, 2008, from ABI/INFORM Global database. (Document ID: 1369331501).
William Milberg (2008). Shifting sources and uses of…...
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Patrick Marren (2007). High-functioning business strategy. The Journal of Business Strategy, 28(6), 37-39. Retrieved August 7, 2008, from ABI/INFORM Global database. (Document ID: 1369331501).
William Milberg (2008). Shifting sources and uses of profits: sustaining U.S. financialization with global value chains. Economy and Society, 37(3), 420. Retrieved August 8, 2008, from ABI/INFORM Global database. (Document ID: 1507056611).
Ann Mooney (2007). Core Competence, Distinctive Competence, and Competitive Advantage: What Is the Difference? Journal of Education for Business, 83(2), 110-115. Retrieved August 8, 2008, from ABI/INFORM Global database. (Document ID: 1410903891).
Attracting more customers and gaining financial advantage over the competition as profits would increase
4
Forces the company to drastically reduce costs, meaning that product quality could suffer demises
-4
0
6.
Focus strategy
Can achieve either of cost advantage or differentiation
4
Addresses a niche market
-4
0
7.
Differentiation strategy
Product uniqueness which allows for the charging of a premium price to cover for the additionally incurred expenditure
5
Additional costs which will reduce overall financial gains (they will however be recuperated from the premium price)
2
3
7. Description of the Selected Strategy
Based on the analysis conducted at the previous stage, it becomes obvious that the most adequate course of action at this stage is that of implementing differentiation strategies. These actions basically translate into the promotion of new products onto existent markets, meaning that Porter's differentiation strategy is the analogue of Ansoff's product development strategy. The table above even reveals that both these strategies have received the highest scores, meaning that they are the…...
Samsung's Marketing Strategy
Marketing management is an important component for the success and profitability of a company in its respective industry or market. Samsung, a South Korean company, has faced intense competition from Apple and other smartphone companies across the globe. Since 2014, Samsung's profit and market share have significantly declined due to intense competition from Apple and Chinese players. However, Samsung has experienced tremendous profitability and increased in the past year because of the adoption of new strategies. According to Jung -- a (2016), Samsung Electronics predicted its best quarterly results in over two years in June 2016. The company experienced increased profitability at a time when the smartphone sector or industry was characterized by declining sales. While Apple, LG Electronics, and Chinese players struggled to cope with the decreased demand for smartphones, Samsung enjoyed high margins of operating profits estimated at $7bn for the June 2016 quarter (Jung-a, 2016).
Seneca Foods was founded in 1949 and is a producer of canned, frozen and bottled foods for the supermarket trade, often under store labels. In 2013, Seneca posted $1.27 billion in sales and net income of $41.4 million. The company is in the mature stage of growth for both itself and the industry, growing mainly with increases in population and inflation. The company's operations are subject to variability from weather, which affects the crops at the heart of the supply chain, and the seasonality of the industry.
Internally, Seneca has a strong supply chain, wherein it contracts with farmers to ensure supply of critical fruits and vegetables for its products. That said, Seneca remains quite small compared with many of its competitors, as Seneca mainly sells in the U.S. And has few major brands. Larger competitors sell globally and have individual brands as large as Seneca's entire operation. One of the…...
Digbly International Inc. has been successfully using throughout the year a Broad Cost Leader Strategy, which permits it a presence in both markets. The Broad Cost Leader Strategy implies obtaining a cost competitive advantage over other companies. For Digbly, it is also equivalent to producing highly qualitative sensors for the market, but keeping in mind a cost efficiency which means lower R& D. spending and scale economies where possible.
Company History
The company's mission, as expressed by the vision statement, has always been to produce quality at low prices ("high quality at lowest prices"). In this perception, the necessity to offer the market completely new products at double the price does not have an economic justification. It is preferable, in this sense, to reposition the product so that it will reach the customers who are likely to be purchasing a lower priced sensor. Value and low cost are the two main components…...
ITW Case Study1. In its first 100 years, what type of diversification strategy did ITW use, and how has it changed since 2012? Do you think managers were encouraged to over diversify? Explain your answer.Founded in 1912, Illinois Tool Works (ITW) is a global manufacturing company with a long history of diversification. In its first 100 years, ITW used an aggressive diversification strategy, acquiring hundreds of small companies in a wide range of industries. However, this strategy began to change in the early 21st century, and by 2012 ITW had sold off many of its non-core businesses and refocused its attention on its core businesses of welding, automotive, and construction. This new strategy has been successful, and ITW has continued to grow and prosper in the years since. While its portfolio of businesses may have changed over time, ITW remains a diversified company with a long history of success. Today,…...
The marketing strategies that will create positive relationships with the shareholders will certainly be in the growth strategies category. Following the discussion we have previously had for the customers category of stakeholders, a diversification strategy seems to be the most appropriate to encourage positive relationships with the shareholders.
Indeed, a diversification marketing strategy will encourage the shareholders to believe that the company is constantly willing to promote its own business model and its own particular products and services on the market. Additionally it will also sustain the idea that the company has a clear plan and strategy for the future, one that will support the company's profitability.
On the other hand, the company also has to promote innovation strategy of the leader/pioneer type. Such a strategy will determine the fact that the management's aim is towards supporting a leadership path into the future. Such marketing strategies will allow the shareholders be confident…...
Does having two companies' stock increase the expected value of your portfolio? If not, then why is diversification a good thing in this example?
Having the portfolio which consists of two equal stocks doesn't increase portfolio's value, which will remain the same ($105,000), yet it decreases the risk of winding with nothing, as the probability of winding with nothing in case portfolio consists of two companies' stocks is twice smaller (0.25 against 0.5) and the probability of favorable outcome is 0.75 compared to 0.5 for a one company stock portfolio.
A d) Calculate the probability that you will end up with nothing, and the probability that you will end up with $210,000, for each of the following cases: splitting your money evenly between 3 stocks, between 5 stocks, and between 10 stocks. What is happening to the probability of "in-between" outcomes as portfolio diversification increases in this example (no exact answer…...
In today's ever-evolving financial landscape, strategic investment decisions are paramount for maximizing portfolio growth and mitigating risks. By meticulously analyzing market trends, evaluating investment opportunities, and implementing a well-diversified approach, investors can navigate market volatility and achieve their financial goals.
Refined Thesis Statement:
In the dynamic and multifaceted world of investing, the judicious allocation of capital is crucial for achieving optimal portfolio performance. Through a comprehensive analysis of market conditions, the evaluation of potential investments, and the implementation of a prudent diversification strategy, discerning investors can navigate market uncertainties, mitigate risks, and maximize returns in the pursuit of their financial....
1. Analyzing Nestle's diversification strategy: How has Nestle expanded its product portfolio and entered new markets to drive growth and increase market share?
2. The role of acquisitions and mergers in Nestle's corporate strategy: Discuss how Nestle has used M&A activities to drive growth, acquire new capabilities, and enter new markets.
3. Examining Nestle's sustainability strategy: How has Nestle incorporated sustainability and ethical practices into its corporate strategy to create long-term value and achieve competitive advantage?
4. Evaluating Nestle's global expansion strategy: How has Nestle expanded its international presence and adapted its business model to different markets and cultural contexts?
Here are some potential essay topics on corporate level strategies of Nestle:
1. Analyze and evaluate Nestle's diversification strategy. How has Nestle expanded its product portfolio over the years and how has this contributed to its overall growth and success?
2. Assess Nestle's international expansion strategies. How has Nestle entered new markets and expanded its global presence? What challenges has the company faced in pursuing a global strategy?
3. Examine Nestle's strategic alliances and partnerships. How has Nestle collaborated with other companies to strengthen its competitive position and drive growth? What benefits has Nestle derived from these strategic alliances?
1. An analysis of Nestle's diversification strategy and its impact on the company's growth and profitability.
2. Exploring the role of acquisitions and mergers in Nestle's corporate strategy and its effect on competition in the market.
3. Investigating Nestle's focus on sustainability and social responsibility in its corporate strategy and the benefits it brings to the company.
4. Evaluating Nestle's international expansion strategy and its success in entering new markets and adapting to local cultures.
5. Analyzing Nestle's product portfolio management strategy and its impact on maintaining a competitive edge in the industry.
6. Examining Nestle's pricing and branding strategies and how they contribute to....
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