Question

What does it mean for a firm to be "diversified"?  For example, is the Coca-Cola Bottling Company diversified because they sell Coke and Sprite--a cola brand and a clear soda brand? (HINT: No, two soda brands is not a diversification strategy, but Coca-Cola may be diversified in other ways.) Can you guys think of examples of companies that have a diversified strategy according to the definition in the textbook? How do related and unrelated diversification strategies differ?

Answer 1

Ans.

Diversification is When a firm has to make the corporate strategy decisions . Corporate strategy means a firm uses strategy to compete across multiple business. Many small firms want to grow by entering new businesses and many large firms are already in multiple business. In other words a business that operates in more than one industry or market as well as uses different distribution channels as a matter of corporate strategy is called diversified firm.

For example IKEA. It is the global home furnishings company. It provides well designed products at lower price.In 2013 IKEA also started investment in hotels as well. It did partner with Marriott international to open chain of three star hotels. The chosen brand for this venture between Marriott and IKEA is moxy hotels.

Related diversification is when a business expands or adds it's existing lines or market. There is advantage of understanding business and know what are the threats or opportunities for industries.

Unrelated diversification is when business adds new or unrelated product lines or market. It is cost efficient. There is no direct fit with existing business.