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Diversification

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by

Sarah Batten

on 1 April 2011

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Transcript of Diversification

Case Study: Tesco Diversification: What is it? 1 2 3 Definition: the act of introducing variety growth into new products a corporate strategy aim to increase profitability 1 2 3 Types of Diversification But what about the disadvantages... company diversifies into same field area

able to transfer technical knowledge

new product/service is marketed to new and existing customers Concentric Diversification risk reduction exploits economies of scope Advantage no3 Horizontal Diversification new product/service within same field area loosely linked to original product

appeals to existing customer base Conglomerate Diversification (aka Lateral Diversification)
new product/service unrelatd to current items

may appeal to existing customers

more risky than other types of diversification

potentially more beneficial 1919: Jack Cohen founded Tesco, when he began to sell surplus groceries from a stall in the East End of London.

1952: Tesco first self-service store opens in Maldon, Essex

Jack Cohen's business motto was "pile it high and sell it cheap", 1968 The first Tesco Superstore opens in Crawley, West Sussex

1974 Tesco open’s it’s first petrol stations at major sites

1985 Tesco becomes the first major retailer to emphasise the nutritional value of its own-brand, to customers, through the ‘Healthy Eating’ initiative 1992 Tesco launches its Organic range
Computers for Schools is launched
The first Tesco Metro store opens at
Covent Garden, London
‘Every Little Helps’ is launched


1993 Tesco Value is launched

1995 Tesco Clubcard is launched 2000 Tesco.com is launched

2002 launch of ‘Free From’ products, designed for customer’s with special dietary needs.

2003 the launch of UK telecoms comprising mobile and home phone services. 2007 Tesco launches the first of it’s insurance products.

Enters the mobile phone market with O2

2008 home insurance launched

2009 Tesco.com/clothing is launched
Tesco goes into banking by opening
branches and current accounts 2010 onwards

Moves into film making, forming a record label and opening beauty salons.

In China Tesco opened the 'Lifespace Mall' is a comprehensive shopping center which has seven floors, including two underground and five above ground, and 600 parking spaces. Single business firm - derives >95% from a single activity
Dominant business firm - derives 70-95% from a single activity
Related business firm - derives <70% from a single activity
Unrelated business firm - derives <70% from a dominant activity Rumelt's 'Relatedness' theory: So, what are the advantages? Increased efficiency lack of clarity lack of stakeholder buy-in cost of starting new venture A presentation by
Sarah Batten & Tina White One of four main growth strategies defined in Product/Market Ansoff matrix _____________________________________________ Aburto, 2010 _____________________________________________ How have they diversified? Conclusion Originally specialising in food and drink, it has diversified into areas such as:
• Clothing
• Electronics
• Financial services
• Telecoms
• Home, health, car, dental and pet insurance
• Retailing and renting DVDs,
• CDs and music downloads
• Internet services and software
• Beauty salon’s and film production. A dance studio perhaps! so what's next for Tesco? But, more likely... Housing and communities plans to develop 4 'mini-villages' in South East of England

'mixed-use living and leisure' in Ipswich and North East England

building fully 'eco-store' along with mini-village in Seaton
also... opticians
insurance
finance
phones - own network
clothing
diets Thank you! £56.9bn Profit for year 09/10 9% increase on 08/09 or an extra £3.4bn - Diversification has worked well for Tesco, profits continue to increase and new market ventures are due in the next 12 months
- YOY profit continues to increase with profits predicted to grown by another £3.7bn in 2010/11
- although the recession hit Tesco the repurcussions were minimal as with such a diverse business losses were small and balanced in comparison to competitors Entropy - the smaller, the less diverse 2004 Tesco launches own-brand Fairtrade range
Tesco Broadband is launched

Tesco.com becomes first major British supermarket to enter music download market

2005 Homeplus launches

2006 Tesco direct
Full transcript