Question

what are some businesses that diversified? Were they successful? Where there any that just did not work? why?

Answer 1

There are many businesses that have diversified. Some of the notable ones are

• Disney Studio diversified into Disney theme park
• Hewlett Packard Printers diversified into Hewlett Packard Enterprise Services
• IBM Computers diversified into IBM Services
• Mitsubishi has diversified into various different products ranging from Airplane parts to simple needle manufacturing

IBM’s was extremely well known for their hardware. Computers made by IBM was the most popular at few decades ago. However, IBM slowly ventured into services business and diversified themselves. Later, IBM’s most popular product, the PC division was sold to Lenovo. The company right now generates majority of its revenue through software services. Their attempt at diversification from hardware to software has been very successful.

Not all diversifications are successful. For example, few years ago, Google attempted to diversify their business by entering mobile phone manufacturing. In order to do that they began their own line of hardware known as the Nexus series. At that time, Google acquired Motorola in order to establish themselves as a serious mobile phone manufacturer. However in 3 years, Google sold Motorola to Lenovo. The organization, Google, is predominantly in software. Their attempt at hardware manufacturing seemed like a logical choice. However, that did not work out well.

The reason many of the diversification attempts do not work can be attributed to mainly two factors.

1. Diversification does not improve the parent company’s value proposition
2. Diversified product/service does not use the parent company’s distinct capabilities

When one or both of these factors are present in a diversification story, the likelihood of failure increases multifold.