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. In an attempt to expand their market size and invigorate their brand, many firms take a shot at diversifying their brand. Understanding Diversification. Textron, Inc. This company may be the very definition of a conglomerate. Revenues per sale go up and those who might forgo coffee to get the sandwich might be more inclined to get both from Starbucks. Is Diversification Necessary? Consumers spend a lot of time and money trying to stay in shape, get healthy and recover from injuries. It might seem hard to distinguish the difference between a bank and a financial services brokerage firm these days. It even once owned the television network NBC. If done correctly, Although Coca-Cola has generally ignored the snacks market, its drinks portolio almost mirrors Pepsi's. Examples of Horizontal Diversification. Unrelated diversification involves entering an entirely new industry that lacks any important similarities with the firms existing industry or industries, and is often accomplished through a merger or acquisition. Here are our picks: Initially a lighting business, General Electric diversified into medical devices and household appliances. These are still the same meals. Because films and television are both aspects of entertainment, Disney’s purchase of ABC is an example of related diversification. Related diversification occurs when a firm moves into a new industry that has important similarities with the firm’s existing industry or industries (Figure 8.10 The Sweet Fragrance of Success: The Brands That “Make Up” the Lauder Empire ). Once upon a time, you would see a very distinct difference between a physical therapy office helping patients recover from injury and a massage therapy office focusing on relaxation and preventative care. How to Remove a Bank Account From PayPal if I Am Unverified, How to Combat the Negative Side of Consumer Behavior With Societal Marketing. Examples of conglomerate diversification include General Electric, Virgin Group Ltd. and The Walt Disney Company. After all, if the customer trusts the bank with his money, why wouldn't he trust the bank with investment ideas or life insurance. In the budget market for passenger cars, Volkswagen sells its own eponymous brand, as well as cars produced by SEAT and Skoda. Related diversification is when a company operates several businesses that are linked together in some way or has several related product lines. Related diversification occurs when a firm moves into a new industry that has important similarities with the firm’s existing industry or industries. More and more small and large businesses in these industries have diversified to expand the market. Under related diversification the company makes easier the consumption of its products by producing complementing goods or offering complementing services. In 1965, for instance, they acquired Audi, a premium car brand aimed at business executives and other high-income customers. What other successful examples of horizontal diversification have inspired you? A company can diversify its operations by either acquiring another company or merging with a company with a different line of business. 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 When consumers have multiple products with a financial institution, they are less likely to shop around and leave to a competitor. 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. 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. Typically, the merger process is very expensive, and the companies need to formulate a strong long-term strategy to ensure that the diversification is beneficial to the shareholders. Some business owners keenly realized there was more they could offer existing clients and diversified. An example of conglomerate diversification would be Tata Group, which was founded in 1868 and diversified from its humble beginnings as a hotel company into a global multinational encompassing 100 individual companies. Virgin expanded from a record label to transport and healthcare, while Disney’s operations range from film studios to entertainment parks. A core competency is a skill se… 1.1 Actual diversification development over the last decades 1.2 Diversification and company performance: results of empirical studies 2. This is due to the Virgin Group partaking in whats known as unrelated diversification the fifth strategy in Ansoffs Matrix. In order to illustrate this point, and demonstrate in real terms how horizontal diversification works and what it can achieve, we've compiled a list of companies that have mastered this strategy – whether through aggressive acquisition or in-house product development. The goal of such diversification is to achieve strategic fit. 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. Diversification strategy examples are prevalent in big and small businesses around the globe. Examples of Business Diversification. For example, BIC is said to follow a related- constrained diversification, as all of its products (razors, cigaret… From 1976 onwards, they created iconic computers such as the Macintosh series, but by the late 1990s, the company was struggling in this market, falling way behind its main rival Microsoft and their hardware partners. They even ventured into the cruise business in 1998, when they failed to find new partners for licensed cruises to Disney World resorts. Of course, many high-end restaurants may feel that delivery or curbside pickup degrades the image of the restaurant, but other owners make a choice to expand their market reach with convenient purchase options. Unlike many entertainment companies, Disney does not solely rely on films, TV, or parks; it is well diversified and relies on its wide reach to create one of the most recognized and … Physical therapy offices offer relaxation massages as well and may even have workout classes such as Pilates. Market diversification means extending your business offering to new market segments not previously targeted. 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. It now employs 706,000 people across a variety of sectors such as chemicals, steel, automotive, engineering, telecommunications, information systems, and … 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. ‘Brand diversification’ commonly refers to a process of launching a new product in a new market, as seen in Ansoff’s Growth Matrix; examples of such strategy are the McCafe, Nike’s golfing collection, IBM’s business intelligence & analytics, and UberEATS. Credit card payments collected by DeltaQuest Media (Ireland) Ltd, Company No IE548227, Registered address: The Black Church, St. Mary’s Place, Dublin 7, Ireland. It also sells fruit juices (Minute Maid), energy drinks (Powerade), mineral water (Glaceau), and coffee (Costa Coffee), while it even made an eventful foray into the wine market in the 1980s. This diversification model is subtle, because the company isn't changing what it offers. Although Honda is best known for its cars and trucks, the company actually started out in the motorcycle business. Because it leverages strategic fit, companies that engage in related diversification are more likely to achieve gains in shareholder value. In addition to achieving higher profitability, there are several reasons for a company to diversify. Since Google is in the information business, in 2014 it purchased Titan Aerospace, a maker of solar-powered drones, an example of related diversification. For example, a company that manufactures industrial adhesives might decide to diversify into adhesives to be sold via retailers. 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