Diversification Strategies

In the second quarter of 2000, AOL settled with the SEC with regard to its’ previously discussed controversial accounting policies. AOL agreed to pay a $3.5 million fine and to reissue earnings statements for years 1995 and 1996. By so doing, it wiped out all the profits the company had made. In the 4th quarter of 2002, AOL registered its’ first decrease in subscriptions with a loss of 200,000 members. Every quarter after that showed additional losses, until at the spin off in December

On the other hand there are also many other strategies that can achieve profitable growth such as a takeover or a merger. Orange and T-Mobile were two mobile phone companies that had nearly reached the end of their product life cycle in 2008 due to the rising popularity of other networks offering new USP’s such as 3’s unlimited internet and Vodaphones ‘freebees’ perks. However with the equal merger of the two companies in 2010 and performing under the new refurbished name that is EE (everything everywhere), it is now the largest mobile network operator in the UK, with around 28 million customers. The synergy between these two companies has not only increased

Beside this mistake, America Online has made more mistakes; another example is music they offered on a program disc, where the allocated URL belonged to a competitor. All mistakes could have been avoided with better research and preparation. AOL should try to anticipate these mistakes in the future, by adjusting their marketing approaches to different countries and their cultures. AOL should realize that its American approach is perceived in many other countries as too aggressive, thereby offending not only local competitors but also national consumers.

For the threat of new entrants, the financial market in United States is fiercely competitive. The threat of new entrants is not serious for some companies that have been famous for a long time. Capita One continued to seek technological innovation and adopt the diversification strategy, they stick to running business including credit cards, auto loans, family loans, savings, personal credit, insurance and so on. According to the data on MBAlib website, by the end of 2017, the credit card loan balance of Capital One was 97 billion 100 million dollars, which is the third place in the U.S credit card market. The companies in the first and second is 141 billion 800 million of Morgan and 133 billion 300 million of Citigroup. The revenue of credit card accounts for 62.8% of the total revenue.

In the editorial “Verizon’s AOL deal: ISPs go searching for content”, by The Times Editorial Board, points out the important benefits that Verizon acquired by buying AOL, the most popular dial-up internet service in the country. The principal reasons of the agreement to buy AOL and the benefits they received are: AOL’s content business, the subscriber's exclusive content access, and the probability to have preferable treatment to sites and services for their customers. First, Verizon's smart move was to obtain primarily the business content from AOL. All the advertising tools from AOL are an important investment for the future of Verizon's strong standing. Another benefit that Verizon obtain from AOL was the subscribers

AN example, in 2008, Hewlett Packet purchased Electronic Data Systems to enhance the services aspect of the partnering technology offerings (Yurko, 1996). Marketing networks now give companies much wider customer access including overnight services. One such merger is the Takeda Pharmaceutical Inc. Although distribution chains work great to increase the bottom line, these mergers are not well received by federal agencies like the Federal Trade Commission. The concern being monopolization which is when one company controls too much of a given industry. Another driver of mergers is a desire for a leadership change. Sometimes the owner of the high technology firms simply wants to sale out and has problems finding a successor within to take the helm. Hence, a merger holds an

The corporate strategy of the business diversification is to create a synergy to achieve more performance under a single umbrella rather than diverse business units (SNU, 2016). A business diversification is to build the company shareholder value when the independent business units can perform under a single corporation as an umbrella organization instead of independent parents or a corporation. A diversified organization has many business units and each business units have its own business level strategy irrespective of whether they are related or not. A successful business diversification not only spreads the business risk across the diverse units but also adds a long term economic value to the company. The strategy for starting a new business is based on industry attractiveness test, the cost of entry and the better off test (Thompson, Peteraf, Gamble, and Strickland, 2016).

“Content creators and advertisers are hungry for more alternatives,” Verizon’s chairman and CEO Lowell McAdam said. “Verizon intends to be a significant player in this space.” As growth in traditional telecom business get slower every year, Verizon has decided to venture in to the content business with acquisitions of AOL and Yahoo.

Mergers are such a complex concept, which can bring about a variety of emotions. I remember learning about the topic while pursuing my MBA. During that time, I reviewed companies that had merged and their history. Some were horrible stories of people losing their jobs and a loss of the mission of the company. I think that in most of these cases (the ones I learned about through MBA) the merger was done out of fear. Their company was struggling to grow, had financial issues, or policy were changing the way they needed to do business. Perhaps this was why there were negative repercussions from the merger.

1. What accounting approach has AOL used in the past that it is now changing (related to the $385 million)?

Nevertheless, the vertical value chain created by Aldi benefits the company’s corporate strategy. To be a local supplier,

The company may face structural problems associated with the diversification strategy. As the company gets larger and larger and diversify into different product divisions, the organization structure should be changed to fit the diversification strategy. An inappropriate fit may result in low performance and lead to strategic changes.

Share holders suffered even more, as stock prices plummeted from the time the merger was first announced. A major part of the failure of this merger was the fact that developing a “learning culture” was never considered, and no strategic vision was created for the newly merged organizations. For example Time Warner Cable’s high speed Internet services, Road Runner, as part of its profitable cable operations was never integrated with AOL as Case explained in his 2005 article in the Washington Post (6/ 11/05: B01). The first AOL Time Warner Annual Report (2000) claimed that it was fostering “… a nimble, entrepreneurial culture that recognizes that it can only succeed if everyone supports the new organization based on a shared set of values and common goals.” Unfortunately, the team-work necessary to integrate the two companies never happened, because there was no shared strategic vision of what the merger should be, and where it would be going. Merger Failure and the Need for a Culture of Learning According to some estimates, 85% of merger failures are related to the mismanagement of cultural issues. Awareness of cultural differences is then seen as an issue of primary concern when organizations merge. According to Miller (2000:8): “Once you develop an understanding of the current culture, and have compared that with the goals of the merged

Time Warner is also taking part in joint ventures which bring it more opportunities to advertise and sell its products. For example, in 1993 Time Warner and US West worked together to improve U.S. cable systems to an interactive fiber-optic data highway that could lead to such direct services to the home as music on demand and video on demand. This deal was based on U.S. West investing $2.5 billion in Time Warner Inc. which gave them a big stake (25.5%)in

One of the benefits of both unrelated and related diversification strategies according to Zhang was, “Speed and differentiation… two approaches to be better customer focused; speed in being able to satisfy customers’ needs as quickly as possible and differentiation in being able to offer new and innovative products to meet different needs. (pg. 7)