DIVERSIFICATION STRATEGIES

Business Diversification Analysis

[Name of the Student]

[Name of the Professor]

[Date of Submission]

Table of Contents

Introduction1

Unsuccessful vs. Successful Diversification1

Philip Morris International Inc.1

Campbell Soup Company2

Philip Morris: Diversification3

Campbell Soup Company: Diversification4

Main Reasons for Diversification Outcome4

Philip Morris International Inc.4

Campbell Soup Company5

Recommendations for Campbell Soup Company5

References7

Business Diversification Analysis

Introduction

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 (Marlin et. al, 2005).

Unsuccessful vs. Successful Diversification

Philip Morris Company Overview

PMI or Philip Morris International is a leader in Tobacco manufacturing. Its core operations include manufacturing and sales of cigarette and related tobacco products. The marketing of products is done in around 160 countries. The company employees around 77,000 people and Head quartered in New York, U.S.A. By the end of year, Dec. 2009, company recorded sales revenue of around USD 62,000 million which was a decrease of around 2.6% in comparison to year 2008. The decrease was caused by the mix of lower volume and unfavorable movement in currency. In FY 2009, the company made an operating profit and net profit of around USD 10,000 million and USD 6,343 million respectively. Operating profit and net profit declined by around 2% and 8% respectively (Datamonitor, 2011).

Campbell Soup Company Overview

Campbell Soup's core operations include manufacturing and manufactures and markets foods and simple meals, including baked snacks, soups and sauces, and hale and hearty beverages. The marketing of products is done in U.S. The company employees around 18,400 people and Head quartered in Camden, New Jersey. By the end of year, Jul. 2010, company recorded sales revenue of around USD 7,676 million, which was an increase of 1.2% in comparison to year 2009. The decrease was caused by the mix of lower volume and unfavorable movement in currency. In FY 2009, the company made an operating profit and net profit of around USD 1,348 million and USD 844 million respectively. Operating profit and net profit increased by 13.8% and 14.7% respectively (Datamonitor, 2011).

There are four business segments which include U.S. soup, beverages and ...