Diversification: A Business Strategy

1194 Words5 Pages
Introduction Diversification as a business strategy has a number of advantages. Diversified firms experience more stable cash flows, gain more market knowledge and when they are able to tie their different products together can often experience synergies as well. When diversification fails, however, it can drain a company's finances and create a distraction within the organization. Some firms struggle with diversification, trying to branch out from their core business repeatedly, but never being as successful in the new businesses as they are in their core business. This paper will look at two successful companies and examine some of their diversification efforts. Amazon was able to expand its product line significantly, adding dozens of product lines on top of its core lines of books and movies. Starbucks, for all its success, has struggled at times with diversification efforts. It has pulled out of markets like Australia and Israel (Mercer, 2008). It struggled with the introduction of hot food, and its attempts to branch out into music were not nearly as successful as senior management had hoped they would be. Amazon Amazon started life as an online retailer focused on books and movies. The company enjoyed early success, and was able to develop technological competitive advantages. The company gradually added product lines, and as the result of its aggressive diversification Amazon has solidified its place as the world's largest online retailer. Product lines
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