11/22/2023 0 Comments Outboard motor drink mixer amazon![]() By building a portfolio of stocks, an investor can minimize the chances of suffering a huge loss. “Don’t put all your eggs in one basket” is often a good motto for individual investors. Unfortunately, the possible benefits to 7Up never materialized. Thus, on the surface, the acquisition of 7Up by Philip Morris seemed to offer the potential for Philip Morris to take its existing marketing skills and apply them within a new industry. Companies must convince consumers to buy these products through marketing activities such as branding and advertising. Both soft drinks and cigarettes are products that consumers do not need. Sometimes the benefits of related diversification that executives hope to enjoy are never achieved. Honda also applied its engine-building skills in the all-terrain vehicle, lawn mower, and boat motor industries. When executives decided to diversify into the automobile industry, Honda was successful in part because it leveraged this ability within its new business. Through competing in this business, Honda developed a unique ability to build small and reliable engines. Although Honda is best known for its cars and trucks, the company actually started out in the motorcycle business. Honda Motor Company provides a good example of leveraging a core competency through related diversification. Figure 8.4: Honda’s related diversification strategy has taken the firm into several businesses, including boat motors. Figure 8.3: Estee Lauder exemplifies related diversification with their ventures into skincare, makeup, and hair care products. For example, Newell Rubbermaid is skilled at identifying under-performing brands and integrating them into their three business groups: (1) home and family, (2) office products, and (3) tools, hardware, and commercial products. A core competency is a skill set that is difficult for competitors to imitate, can be leveraged in different businesses, and contributes to the benefits enjoyed by customers within each business (Prahalad & Hamel, 1990). Some firms that engage in related diversification aim to develop and exploit a core competency to become more successful. 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 8.1). In the case of Philip Morris and 7Up, for example, neither side benefited significantly from joining together. Will the new unit and the firm be better off? Unless at least one side gains a competitive advantage, diversification should be avoided.Making up these costs proved to be impossible and 7Up was sold less than 10 years later. When Philip Morris bought 7Up, it paid four times what 7Up was actually worth. How much will it cost to enter the industry? Executives need to be sure that their firm can recoup the expenses that it absorbs in diversifying.Porter’s Five Forces Analysis can help with this assessment. How attractive is the industry that a firm is considering entering? Unless the industry has strong profit potential, entering it may be very risky.How can the firm operate more efficiently and effectively through its diversification efforts? Three Tests for DiversificationĪ proposed diversification move must first answer three questions to determine if it should be accepted or rejected (Porter, 1987). In all three diversification strategies, the goal is to achieve synergy. ![]() Geographic Diversification -Operating in various geographic markets, which is the corporate strategy of Starbucks, Target, and KFC.Unrelated Diversification -Diversifying into new industries, such as Amazon entering the grocery store business with its purchase of Whole Foods. ![]()
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