Question

Select a company that has chosen one of these options - related businesses, unrelated businesses, and a mix of both.

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?

Answer 1

IKEA is all about Diversification

JULY 29, 2017 ~ IKEACURIOSITY

Corporate diversification strategies can be categorized into three types: limited diversification strategies, related diversification strategies, and unrelated diversification strategies.

Limited diversification is when a firm stays within one industry and market and most or all of its business activity is focused within a single business or dominant business. Ikea’s main business is home furnishings and it has largely stayed within that industry. Ikea continually encourages diversification through the IKEA Concept. Ikea also has food items that people are very fond of. While Ikea is not in the food industry, they realized that when people visit the massive IKEA stores and spend hours browsing and shopping, they get hungry. So IKEA started offering food for purchase and a spot in the middle of the store where people can order fresh meals. Customer also can purchase a variety of packaged food items.
This is a catlogues of products of IKEA


One example of unrelated business would be Alibaba

ALIBABA’S DIVERSIFICATION STRATEGY FOR MORE SUSTAINABLE GROWTH

The current strategy of Alibaba to ensure a constant growth is to diversify the kind of services it can propose to its millions of users, trying to keep consumers engaged within its various services instead of them wanting to spend time (and money) elsewhere.

From an economic perspective, Alibaba’s diversification is usually key to a more stable profits, thus the Chinese e-commerce marketplace is actively diversifying its revenue streams in order to minimize its dependency on its core e-commerce services. If you look closely, you will see how Alibaba is somehow following the model of Amazon.com. At the end of 2016 it decided to consolidate its media and entertainment businesses into only one team, focusing more on its cloud and entertainment operations. This allows Alibaba to implement a cross-promoting strategy and the use of the money-maker e-commerce business to pay for production of content.

Even though most of the Chinese firm’s profits still come from core e-commerce (up to 87.5%), Alibaba’s fast growing revenues comes partly from newer areas, like its cloud service business, that provides internet-based computing and data storage.