• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

"Every diversification decision is an entry decision" - Discuss this statement in terms of its implications for the success of new business diversification.

Extracts from this document...

Introduction

"Every diversification decision is an entry decision." Discuss this statement in terms of its implications for the success of new business diversification. Your answer should address issues of competitive advantage, industry analysis and industry evolution. What is the motivation for diversification? What is the process to set up the diversification venture? What are the determinant factors that make diversification successful? And what are the rules to manage diversification? Many firm in mature stage find themselves have little room to grow, difficult to capture more market share and to earn more profit. The future of the established firms could be threatened by industry disruption as innovative start-ups entering the market. Those more capable incumbents would constantly adapt to the new rules of competition through both innovation and imitation. There are several reasons that would motivate firms to consider diversification. First, the volatile business could cause firms' earnings uncertain, or the changing business climate could cause firms less profitable than before. EMI Ltd. is a good example, emerged as the Electric and Musical Industries, and then redirected itself towards the development of sophisticated electronic devices during the war. After the war was over, EMI was struggling to make profits because its business was largely aligned with the defense-related products. So the CT scanning came into birth, after EMI's vision on the great opportunity this breakthrough medical technology would bring. ...read more.

Middle

In order to make the new business successful and to improve a firm's value or lower its cost through continuing innovations, building up dynamic capability is a key activity needs to be enacted repeatedly. Strategies should be developed to address how to produce a greater economic contribution than rivals and how to retain customers and prevent imitation to have a sustainable market. The five factors also need to be taken into consideration are financial capital, resources, capabilities, entrepreneurial management skills, and general management. Financial capital should be available for the new business hoping for a greater return in the long term. Resource such as a brand or geographical location or operational capacity is value-add asset that contributes to the firm's performance. Capability is firm's ability to continuously accomplish tasks at a high level of expertise by using its organization and people. The success of Microsoft's office suite application largely replied on the heft investments, the Window's OS brand name and the quality products it brought to the market. Bundling software applications together into a Suite with a discount price is an indeed genuine strategy. Microsoft also took full advantage of Windows to offer applications by smartly making the software applications and operating system complementary to each other. Therefore, Microsoft could offer customer with more value and lower cost that eventually led the company to take over the software application market. ...read more.

Conclusion

To manage a new venture well, we must know how to differentiate it from or integrate into firms' exiting business and we also need to learn how to coordinate between the venture and the rest of the corporation. When the venture entering into a market requires substantial different mechanisms, then it will be a better idea to separate new business from the firm, having independent resource allocation, incentives system, coordination and control systems. When the existing resources and capabilities can be served as the foundation for new business development, then the new business should take these available advantages to leverage the scope of economic. EMI's misjudgment of choosing integration to run the US operation was the cause for the company to face a number of troublesome problems. Despite EMI identified the US as the most profitable market, it was still running a centralized organization based on UK, which made the company lost control over CT Scanner business in US, ranging from differentiable products, manufacturing, marketing, sales muscles to pricing. While Microsoft's leveraging its OS Windows advantage to diversify its business into the software application and Internet Browser is a successfully case utilizing integration. In conclusion, every diversification decision is indeed an entry decision. The new ventures have to continuously and consistently demonstrate their executions on growth and innovations and build up barriers preventing competitors from imitating, and have to accumulate more competitive advantage while developing better dynamic capability during the course of industry evolution. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our University Degree Marketing section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related University Degree Marketing essays

  1. Analysis of Coca Cola. Coca-Colas vision serves as the framework for their Roadmap ...

    That's what Coca-Cola 2020 Vision is all about. It creates a long-term destination for their business and provides them with a "Roadmap" for winning together with their bottling partners. 4. CEO, Muhtar kent. Coke's CEO is Muhtar Kent, born in the U.S. of Turkish parents. He left Coke to run a large Turkish-based beverages company before returning to Coke in a senior roles and ultimately being named CEO.

  2. Analysis of Tescos entry into the US Market

    This paved the way for Tesco to expand its presence in Scotland, which was weaker than in England. In 2006 Inverness was branded as "Tescotown", because well over 50p in every �1 spent on food is believed to be spent in its three Tesco stores.

  1. International Marketing - Potential Market entry Strategies for ASDA-WALMART

    It takes time to make contacts and build relationships, negotiate deals, understand the market and carry out marketing. Advantages * you are in control of pricing * you are in full control of your brand * you get a direct understanding of buyers' or end users' needs and an ability

  2. Free essay

    CONSUMER BUYING DECISION MAKING

    her party next week; she then would begin to prepare for a possible solution, such as a trip to the shopping mall and buy a dress for herself. In this case, the girl is initiator. She came out idea of purchase a dress.

  1. Take an organization that you know well and identify its distinctive capabilities. Compare the ...

    To go globalization, an enterprise has to find solutions for problems mentioned above. Haier group provided us some distinctive experiences. Company Brief: A successful transnational corporation Haier, a household electrical appliance producer, founded in 1984, has grown and prospered

  2. Economies of Scale and Barriers to Entry

    Perfect financial markets may also be necessary here so that so that fixed costs are not a barrier to entrants which do not have large cash reserves. Finally, incumbents must not be able to change their prices instantly while consumers respond instantly to price differences.

  1. Examine the Reasons for Uber's Success in the Taxi Market.

    lanes in which only vehicles with two or more passengers are allowed to drive. In the mean time, all became conduced toward carpooling kind of applications for future. Then, real-time-on-demand dynamic ride sharing has taken place in the market and now it shows themselves as mobile applications, since late 2000s.

  2. Reasons for Apple's Success.

    All this mass evolution of Apple products made Steve Jobs primarily realize he has started a movement in technology changing the way technology used in today?s generation and changing it the next. The company continues to evolve and create products better than ever.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work