Research two corporations that have had different outcomes (one successful and one unsuccessful) with their diversification strategies. Compare and contrast each corporation's diversification strategy and evaluate the reasons for each one's success or failure in the venture.© BrainMass Inc. brainmass.com March 21, 2019, 11:18 pm ad1c9bdddf
BusinessMate.Org (2010) defined diversification as a "strategy that takes a company into new markets with new products or services".
In this material, we will identify two companies that failed and succeeded in their diversification strategies--- McDonald's and Walt Disney Company.
McDonald's Unsuccessful Diversification Strategies
McDonald's started its operation in 1940 as McDonald's Bar-B-Que restaurant on Fourteenth and E streets in San Bernardino, California (McDonald's Official Website, 2012).
From 1940 to 1997and to the present, company has experienced significant growth. But what is surprising in its timeline of history is the event of years 1998, 1999, 2000, 2001 and 2002 were left out in it presentation.
Mystery surrounds the company's operation in those years.
Further research showed that these years were periods of financial and economic upheavals for the company.
Michel (no date) narrates the following events:
1. Between November 1999 and February 2000, McDonald's stock declined from $48 to $32 per share [due to the reason] that McDonald's in the United States had reached market saturation.
2. Every opening of a new McDonald's restaurant intruded upon the revenue of other restaurants already in operation. As a result, McDonald's decided to pursue a 'diversification' strategy.
3. McDonald's Switzerland, headed by CEO Urs Hammer, chose to pursue ventures in the hotel business and in 1999 received the green light from McDonald's headquarters.
4. In March 2001, McDonald's Corporation opened its first hotel in the Swiss town of Rümlang. The 211-bed, four-star Golden Arch Hotel was situated close to Airport Zürich-Kloten and was built at a cost of about $26 million. A few weeks later the second hotel in Lully was opened.
5. In the end, a confluence of events hurt tourism in Switzerland and, therefore, the prospects of the McDonald's Hotels. The outbreak of SARS, the terrorist attacks in the United States on Sept. 11, 2001, and the grounding and ...
The solution describes two corporations (McDonald's and Walt Disney Company) adopting different strategies with varying results.