Diversification of Starbucks

1445 Words Feb 17th, 2011 6 Pages
DIVERSIFICATION.
For companies, they all want to have bigger market share and earn more profit. So they will find many ways to penetration into the market like diversification. Diversification strategies are used to expand firms' operations by adding markets, products, services, or stages of production to the existing business. The purpose of diversification is to allow the company to enter lines of business that are different from current operations.There are basically two broad forms of diversification as related diversification and unrelated diversification.
Starbucks is the largest coffeehouse company in the world; they not only sell coffee and coffee beans also sell other drinks, salads, sandwiches and snacks. Besides they bought the
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Smaller stores and kiosks typically sold a full line of coffee beverages, a limited selection of whole-bean coffees, and a few hardware items. Starbucks use their coffee beans not only to make coffee, they also diversify to use coffee beans to make other products and Starbucks can use the same raw material to produce different products to get more revenue. In china, when mooncake festival, Starbucks also offer their own moon cakes. This can attract new customers to try their products.

Diversifying shareholders’ portfolios and reduce the risk
Shareholders invest in a diversified portfolio can reduce the chance of incurring a large loss due to the failure of a single firm. A broadly diversified firm may receive only a small percentage of its revenues from any one line of business. Hence, a share holder seeking to avoid large swings in value can invest in the diversified firm and thus be shielded from risk.
For example, Starbucks had the saturation of the U.S. coffee market, and the decreasing of their gross profit margin, Starbucks has started to move from having a concentrated business strategy to a diversification strategy. Starbucks has realized that once a market matures that it is too risky to be concentrated, and that they should keep diversifying their business product lines in an

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