I need support with this Management question so I can learn better.
This Week’s readings discusses three diversification paths: related businesses, unrelated businesses, and a mix of both.
- Select a company that has chosen one of these options.
- Describe the company (products and services), including its diversification strategy.
- Make sure that your description clearly exemplifies the strategy. What is your opinion about their diversification strategy?
Comment on, or make suggestions about, at least two of your classmates’ analysis of the competitive strategy, and share your feelings about their company’s strategy.
DQ RESPONSE 1
The example that I propose is that of Amazon and their mixed diversification strategy.
Amazon is a world renowned company which in the beginning use to sell books online. People viewed it as an online retailer of books. The owner Jeff Bezos viewed the organization in a different way altogether. He viewed Amazon as an online retailer and slowly diversified as the E – Commerce Company. They were still selling online and were dealing in products but the line of products had expanded. This was their expansion into related business. Amazon was now selling clothing, daily products, electronics and all that one could possibly buy in any megastore. The thing was that all this remained online. Amazon then entered the business of handing out subscriptions and started to host audio/video streaming under Amazon Prime. This has been the diversification strategy into unrelated business where they are still selling online but have changed the whole genre of their products and business model. They have diversified in such a way that now they are sweating the market share of the largest online audio/video streaming company Netflix. Hence we see that Amazon has been diversifying in related as well as unrelated business.
In my view they are able to leverage the mix strategy because they have a huge customer base with a large appetite. This makes their diversification strategy a success. Their market presence see them charging ahead and with the logistic expertise and excellent delivery management they have built a loyal customer base which is helping their business grow from strength to strength. The diversification strategy pursued has till now proven to be sustainable and till they have the support of their loyal customer we can see them continue to grow in the near future. Amazon’s plans to now enter into the brick and mortar retail stores will bring them in a completely new market dynamics where their physical management of customers will definitely be put to test. This would perhaps be a totally unrelated business strategy but as of now their mix strategy is giving their bottom line a big push.
DQ RESPONSE 2
A related business diversification is when a business adds or expand its existing product lines or markets. For example, a phone company that adds or expands its wireless products and services by purchasing another wireless company (Unknown, 2020). The company that I will be talking about is Unilever. Unilever is a FMCG (fast-moving consumer goods) company, and they make and sell products under more than 1,000 brand names worldwide. They are the maker of famous products like Dove soaps, Tresseme shampoo, Vaseline, and AXE, just to name a few (Unknown, 2020). The company recently entered into a new market, herbal products in Asia territory. In Asia is where the company will make and sell herbal soaps, shampoos, herbal toothpastes, and herbal body lotions etc. (Koyanagi, K., 2017). Since Unilever is already in the business of selling consumer products, it entered into a new market segment, which is the next big thing in terms of market potential and growth. Asian countries have a deep culture and the people like using traditional products, which are also chemical free. The related diversification strategy is to make use of current facilities like plants to make the new products. This can lower the risk, as the company is entering into a new segment altogether.
I believe that Unilever made a smart move with their diversification path, related business, because they already have the facilities to make their new herbal products, so they will not have to spend any money to build them. This will give the company a strong pricing power and give them a big edge over their competitors.
Koyanagi, K., (2017 October 19). Multinationals in Asia: For Unilever’s chief, good business is
found in helping the world be better. Retrieved from.
Unknown. (2020). The Differences between Related Diversification or Unrelated Diversification: Which Strategy Best-Fits Your Business? Retrieved from.