On September 30, 2000, Mattel®, a major toy manufacturer, virtually gave away The Learning Company®, a maker of software for toys, to rid itself of a disastrous acquisition of a software publishing firm that actually had cost the firm hundreds of millions of dollars. Mattel, which had paid $3.5 billion for the firm in 1999, sold the unit to an affiliate of Gores Technology Group for the rights to a share of future profits. Was this related or unrelated diversification for Mattel? Explain your answer. How might your answer to the first question have influenced the outcome?
The Mattel acquisition would be considered a related diversification because the company they purchased had a product that was directly related to their line of business. Maybe Mattel did not do extensive research to determine if the company would be profitable. If Mattel was able to swiftly add The Learning Company to their production of toys, they would have seen a profit ...
Related diversification definition and examples are included in this text for the Mattel company, a toy manufacturer.