Diversification Strategies

Diversification Strategies

Introduction

The purpose of this study is to expand the boundaries of our knowledge by exploring some relevant facts and figures relating to different outcomes of implementing diversification strategies. In this paper, the author will discuss the outcomes of diversification strategies implemented by Amazon and Campbell Soup Company. Diversification strategy is to enter new markets with new products. It is often implemented by profit-oriented and relatively fast growth companies. Implementation of such strategies usually requires new knowledge and skills, and acquires new resources. Diversification can be done by own efforts of the company, by purchasing a license and by acquiring other companies or mergers with other companies (Porter, 1980). In the next section, the author will compare the performance of the two companies and also examine the affect of the diversification strategies on the performance of the two companies.

Discussion & Analysis

Amazon

Amazon.com (Amazon or "the company") is one of the leading global online retailers. It offers a wide range of merchandise, including books, apparel, electronics products and home improvement products through its online website, www.amazon.com. Amazon also operates through various international websites. The company has operations in North America, Europe and Asia. It is headquartered in Seattle, Washington, and employs 33,700 people, which includes full-time as well as part-time employees. The company recorded revenues of $34,204 million during the financial year ended December 2010 (FY2010), an increase of 39.6% over FY2009. The operating profit of the company was $1,406 million in FY2010, an increase of 24.5% over FY2009. The net profit was $1,152 million in FY2010, an increase of 27.7% over FY2009 (Kenny, 2009).

Successful Diversification at Amazon

One of Amazon's major strength is its ability to extend its product line and strengthen technical platform through strategic acquisitions. It was Jeffrey Bezos after leaving his job as a programmer on Wall Street, has set the objective to build the best online store in the world (not the first, the best) with an obsessive idea: given to the buyer as the best trading experience and he founded in 1994 with based in a garage in Seattle - USA, the company Amazon as the first virtual library on the Web. According to Bezos, the future of the electronic sale is in the identification of supply, for example, the buyer is setting out the products that best fit your tastes based on their previous purchases. Their policies are strategic expansion and diversification, since Amazon does not want its brand associated with a product category, but is associated with the idea that works for customers (Montgomery, 2001).

Evaluation of Amazon's Success

Amazon successfully adopts the strategy of vertical diversification and effectively collaborates with the suppliers, customers and all other stake holders who are related with the company. Indeed, Amazon was the first to explicitly numbered line every step of the process and accompanies their clients to visit them (Adner, 2006).

Amazon created the Amazon's Publisher's Advantage with other publishers. Amazon has managed to revolutionize the market, thanks to a surprising relationship management with the customer and the ...