DIVERSIFICATION STRATEGIES

Diversification Strategies



Table of Contents

Introduction3

Diversification3

Amazon.com4

Core Businesses4

Amazon's Successful Diversification Strategy5

Three reasons for Amazon's Successful Diversification6

Borders Books7

Core Businesses7

Borders Books Unsuccessful Diversification7

Three reasons for Borders' Unsuccessful Diversification8

Recommendations for Borders' Successful Diversification8

References10

Diversification Strategies

Introduction

Developing proper marketing strategies is crucial to an organization to adopt changing market based on organization's capabilities. It also helps organization to increase market share and revenue by reaching new customer segments and new market. It could be using current product to penetrate market in other countries, or develop unrelated product to increase profit margin when attempt to new market share. There are few strategies highly recommended such as Intensive, integration and diversification strategy which are useful and workable for organization to apply.

It has become more important to study the organizational change carried out by firms in order to adapt to environmental changes. In addition, it is widely accepted that structural inertia of organization has a significant impact on its change. Knowledge and skills also have a down side that inhibits development, even though they are viewed as the most important resource in firms. Some firms may rely excessively on certain knowledge and use it repeatedly in order to gain a competitive advantage, especially in industrial firms.

Diversification

Firms expand operations by adding products, markets, stages of production and services to the current portfolio. These strategies through which firms expand are called diversification strategies. The objective of diversifying is to enter into new businesses or market in order to achieve better business results. Concentric diversification means that the company has extended business in the existing line of operations. When the new added business is not related to the current line of business, it is called Conglomerate diversification. In Conglomerate diversification, there is a strategic fit between new and old businesses.

The goal of concentric diversification is to achieve a strategic fit by adding related services or products. Synergy results if a company finds correct strategic fit. Financial synergy may be attained by adding a firm with goof financial wealth but restricted growth opportunities with a company having vast market prospective but fragile financial reserves. In conglomerate diversification, synergy is obtained through applying managerial expertise or financial resource, but its primary objective is to enhance profitability of parent firm. Diversification efforts are either external or internal. Diversification strategies can also be classified by the direction of diversification.

Amazon.com

Core Businesses

Amazon is an online shopping website with one of the largest product supplies online. Amazon is involved in selling products directly or providing a platform for selling a wide range of products. The company is named after the Amazon River, which is one of the largest rivers in the world. It started as an online book store, but soon diversified and started selling CDs, DVDs, videos, computer software etc. Amazon has established itself in a number of countries such as Italy, Canada, China, France, Germany, Japan and United Kingdom. It also provides shipping facilities in many countries and charges for it.

Amazon's Successful Diversification Strategy

The Amazon brand has established high levels of recognition around the world, making it ...