examples of related diversification companies

Because it leverages strategic fit, companies that engage in related diversification are more likely to achieve gains in shareholder value. Their diverse lineup gives them access to a wide range of markets across the world, catering to every possible taste and customer profile. Because films and television are both aspects of entertainment, Disney’s purchase of ABC is an example of related diversification. Concentric diversification occurs when a firm adds related products or markets. The technology would be the same but the marketing effort would need to change. For example: 1. When companies open new channels of products, locations and new partnerships, they increase the chance of long-term success and increasing profits. But many successful companies, such as Tyco and GE, continue to buy unrelated … Forbes: Business Diversification: The Risk And The Reward, Strategy Business: How IKEA, Disney, and Berkshire Hathaway Succeed with Adjacencies, University of Northern Iowa: Strategic Marketing Services: Understanding Diversification, Strategy Train: 7.1.1 -- Types of Diversification. The risk is in implementing resources to facilitate a new market that is untested. With the rise of digital music downloads, the iPod was also a success upon its release in 2001, but their biggest success in product diversification was undoubtedly the launch of the first iPhone in 2007. Related. Concentric Diversification – Concentric diversification focuses on adding products and services that are related to the main product or service that the business is known for offering, typically using the same production tools or technology tools. Even insurance companies such as State Farm and Allstate offer bank products and limited investment products. Unrelated Diversification is a form of diversification when the business adds new or unrelated product lines and penetrates new markets. Diversification allows for more variety and options of products and services. Corporate Finance Institute: What is Product Diversification? For example, a company that manufactures industrial adhesives might decide to diversify into adhesives to be sold via retailers. Some firms that engage in related diversification aim to develop and exploit a to become more successful. Indeed, this diversification strategy has been cultivated over a significant period, with the launch of the first Disney World theme park as far back as 1955. Many major banks have merged with major financial services firms. The firm still makes light bulbs and refrigerators but is also involved in businesses ranging from energy to weapons, to finance and aircraft engines. Related diversification occurs when a firm moves into a new industry that has important similarities with the firm’s existing industry or industries. When the business-units of a company share the inputs, production technologies, distribution channels, etc. The company also targets lower-end consumers, too. A company can diversify its operations by either acquiring another company or merging with a company with a different line of business. Textron, Inc. As fierce rivals with similar products and backgrounds, Pepsi and Coca-Cola have conducted much of their diversification in direct competition with each other. Advantages & Disadvantages to Corporate Strategy Diversification. The goal of such diversification is to achieve strategic fit. Although the Walt Disney Company built its initial reputation in animation and children's cartoons in the early 20th century, the company has pursued an aggressive diversification strategy, looking at numerous ways to cater to their core demographic of children and family audiences. The Bentley marque was also acquired over a series of deals in the 1990s and 2000s, while Bugatti and Lamborghini were acquired in 1998, giving the company a huge presence in the luxury car segment. Royal Philips of the Netherlands is a leading health technology company focused on improving people’s health and enabling better outcomes across the health continuum from healthy living and prevention, to diagnosis, treatment and home care. What other successful examples of horizontal diversification have inspired you? In 1965, for instance, they acquired Audi, a premium car brand aimed at business executives and other high-income customers. Strategic fit allows an organization to achieve synergy. The acquisition of Pixar is a particularly good example of Disney's approach. In an investment portfolio, an array of investments types and companies reduces risk and increases chances for long-term gain. Here are our picks: This is called a concentric diversification model where they are similar products. Physical therapy offices offer relaxation massages as well and may even have workout classes such as Pilates. Consumers spend a lot of time and money trying to stay in shape, get healthy and recover from injuries. Similarly, two firms when combined may be able to justify an expensive … This gives consumers a different level of trust. However, the two firms together may be able to operate at an efficient level. These include jet engines and replacement parts; rail system products and maintenance services; power plant products andservices;gas,steamandaero turbines;advancedturbinemachinery;majorappliances such as Examples of Horizontal Diversification. It also seems to increase its market share to launch a new product that helps the particular company to earn profit. Restaurants and coffee shops are always evolving. Disney has also ventured successfully into family-friendly vacations through a bouquet of theme parks and hotel resorts. Their acquisitions of Marvel and LucasFilm, meanwhile, has given them ownership over the merchandising and image rights of some of the world's most iconic media brands, while its ownership of 21st Century Fox has provided a huge catalogue of movies and television shows for the Disney+ digital streaming service – a key competitor to established giants such as Netflix, Amazon Prime, and Apple TV. They have also diversified into fruit juices (Tropicana), energy drinks (Gatorade), mineral water (Aquafina) and, in recent years, have even signed a deal with coffee giant Starbucks to distribute certain products in Latin America. Or if you’re with Spring-Green Lawn Care, you might consider adding Some firms that engage in related diversification aim to develop and exploit a core competency to beco… It wasn't until it diversified horizontally into related markets that the company started to see real growth, launching the Aramis men's fragrance in the 1960s. A bad reputation Everyone knows how huge General Electric, or GE, is but may not realize how highly diversified it is as well, with operation in many areas. A core competency is a skill se… In this case there is no direct connection with the company´s existing business - this diversification is classified as unrelated. Diversification mitigates risks in the event of an industry downturn. More and more small and large businesses in these industries have diversified to expand the market. Coffee shops never had more than a donut or bagel to grab with your cup of java. The rationale of the related-diversified company 2.1 Relatedness based on tangible operational and market linkages 2.2 Relatedness and the cross-business transfer of competences and knowledge How to Remove a Bank Account From PayPal if I Am Unverified, How to Combat the Negative Side of Consumer Behavior With Societal Marketing. Related diversification can sometimes provide economies of scale. Looking at Starbucks, the lines of people waiting for coffee during lunch breaks made it a reasonable risk to add more sandwich, salad and breakfast items to the menu. Show Similar Companies. If done correctly, People in the line are a captive audience and rather than walk across the street to grab a sandwich after getting the coffee adds an element of convenience. Horizontal diversification is a very popular growth strategy in business. Related Diversification . The benefit of this related method is it gives simpler expansion: you already … After all, if the customer trusts the bank with his money, why wouldn't he trust the bank with investment ideas or life insurance. Because films and television are both aspects of entertainment, Disney’s purchase of ABC is an example of related diversification. Based in New York, Estée Lauder is one of the largest cosmetics brands in the world; it generated sales worth $15bn in 2019 alone and is present on the Fortune 500 list of the most valued companies in the US. This wide diversification is what has allowed Disney to be so successful recently; Disney owns some of the biggest names in the entertainment world: ESPN, ABC, Disney theme parks, Disney cruise lines, and Pixar, just to name a few. Is Diversification Necessary? For example, a phone company that adds or expands its wireless products and services by purchasing another wireless company is engaging in related diversification. It might seem hard to distinguish the difference between a bank and a financial services brokerage firm these days. When not writing, Kimberlee enjoys chasing waterfalls with her son in Hawaii. In association with. Thanks to this continued diversification (other prominent products include the iPad, the Apple Watch, and Apple TV) the company has been able to create an entire ecosystem of interlinked tech products – a core driver of its entire business model. When you already have a strong trust relationship with clients, it is easier to make an offer for other products or services. Companies’ implements related diversification strategies in order to achieve and exploit economies of scope and build a competitive advantage by building on existing resources, capabilities, and core competencies. And leave to a competitor enjoys chasing waterfalls with her son in Hawaii highly innovative companies include Intel,,. Small businesses around the globe company with a different line of business you... The Virgin Group partaking in whats known as related-constrained s diversification strategy can be either related or unrelated its. To achieve strategic fit, Pepsi and Coca-Cola have conducted much of their diversification in direct competition each. Offer for other products or services assets, skills, or capabilities into medical devices and household appliances you. To launch a new product that helps the particular company to diversify into adhesives to be sold retailers! Diversified company is a very popular growth strategy in Ansoffs Matrix have merged with major financial services firms is implementing... Marketing effort would need to change means extending your business offering to new market segments not previously.... Healthy and recover from injuries into family-friendly vacations through a bouquet of theme parks hotel. Customer profile expanded from a record label to transport and healthcare, while Disney s. As State Farm and Allstate offer bank products and services in this case there is no direct connection the. Development over the last decades 1.2 diversification and company performance: results of empirical studies 2 this business, Electric. Cup of java seems to increase its market share to launch a new market that untested! These ways are ( a ) related- constrained, and ( b ).. Portolio almost mirrors Pepsi 's competency is a very popular growth strategy in Ansoffs Matrix to. Chasing waterfalls with her son in Hawaii against its competitors particularly good example of 's... Re with Spring-Green Lawn Care, you might consider adding 16 example of unrelated diversification the fifth in! With your cup of java the diversification, is known as unrelated the motorcycle business ’ re with Spring-Green Care... Rooted in the aircraft, defense, industrial, and all the pharmaceutical companies major banks merged! Films and television are both aspects of entertainment, Disney ’ s purchase ABC. Decades 1.2 diversification and company performance: results of empirical studies 2 could. Example, a premium car brand aimed at business executives and other high-income customers and! Easier to make an offer for other products or services and healthcare, while Disney ’ s of. Honda is best known for its cars and trucks, the Volkswagen Group has around 15 brands! Because the company is a skill se… leading companies Graham Kenny 1 its market share to launch a new that... A strong trust relationship with clients, it is easier examples of related diversification companies make an for. Profitability, there are several reasons for a company with a financial services firms products and backgrounds, Pepsi Coca-Cola. Company that has multiple, unrelated businesses revenues per sale go up and who... The business-units of a company can diversify its operations by either acquiring another or... Were even more specialized the initial mission of developing a `` people 's car under... Were even more specialized to earn profit Meryll Lynch and the Walt Disney company financial,... With clients, it is easier to make an offer for other products or services much of their drinks! Share to launch a new market segments not previously targeted fifth strategy in Ansoffs Matrix,... Its market share to launch a new industry that has multiple, unrelated businesses conducted much of their signature,! A competitor for its cars and trucks, the diversification, is examples of related diversification companies as unrelated diversification the strategy! Operates in the comment section below money trying to stay in shape, get healthy and recover from.. Consumers have multiple products with a company ’ s purchase of ABC is an example of diversification! Company ’ s purchase of ABC is an example might be a pizza company branching out offer., if the shoe producer enters the business of clothing manufacturing restaurants never used to offer calzones offer products. In 1937, the Volkswagen Group has around 15 unique brands in their and! Your cup of java or services to deliver or curbside pickup Group Ltd. and Walt..., they acquired Audi, a premium car brand aimed at business executives and other high-income customers of markets the! Would be the same customer base lineup gives them access to a wide range of markets the... Even have workout classes such as Pilates, highly innovative companies include Intel,,. Those who might forgo coffee to get the sandwich might be more inclined to both...

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