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Diversification Strategy

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What does it mean for a firm to be "diversified"? Is the Coca-Cola Bottling Company diversified because they sell Coke and Sprite--a cola brand and a clear soda brand? what are some examples of companies that have a diversified strategy.
How do related and unrelated diversification strategies differ? Must companies approach diversification differently when their strategy calls for unrelated diversification? What are some examples of companies pursuing related and unrelated diversification?

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Solution Summary

Related and unrelated diversification strategies are defined and compared. Risks associated with each strategy are explained. Examples of companies pursuing related and unrelated diversification strategies are given for better understanding.

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What does it mean for a firm to be "diversified"?
Diversification is a business strategy. To be diversified means to be active in a number of different markets, rather than limiting its products and services to one. A firm can diversify by offering products and services in multiple unrelated markets. The aim is to grow, increase sales volume, decrease risks, fully utilize existing resources and capabilities and escape from unattractive industry environments.
Is the Coca-Cola Bottling Company diversified because they sell Coke and Sprite--a cola brand and a clear soda brand?
Since cola and clear soda markets have similar drink products this can be categorized as related diversification. Because this is related to its main business activity and Coca Cola can expand into clear soda market within existing capabilities and existing value network.
What are some examples of companies that have a diversified strategy?
For example General Electric Company (GE) started with an incandescent lamp business, has moved to businesses ...

Solution provided by:
Umut Oltulu, MBA
Education
  • BSc, Dokuz Eylul University
  • MBA, Texas A&M University-Kingsville
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