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Multi-Product Diversification Strategies

SHR 247 Presentation on Multi-Product Diversification Strategies
by

Ian Jurman

on 6 December 2013

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Transcript of Multi-Product Diversification Strategies


Works Cited
http://www.campbellsoupcompany.com/about-campbell/our-businesses/
http://www.ge.com/about-us/building
http://www.youtube.com/watch?v=lQOJCdtqcW
http://thewaltdisneycompany.com/disney-companies/media-networks
http://www.youtube.com/watch?0LLoR4Y597I&list=PLBD1FD2DB7633070
www.csus.edu/indiv/c/cairec/GM105/PPT/GM105Chapter6_10e.pptx‎
books.google.com/books?isbn=111180513X
http://bkstrategic.com/marketing-portfolio/virgin-international-strategy-analysis/
http://www.virgin.com/company
http://www.virginaustralia.com/au/en/about-us/careers/department-profiles/
http://ezinearticles.com/?Virgin-Americas-IT-Strategy&id=765267
"Contemporary Strategy Analysis" by Robert M. Grant, Case 20: Richard Branson and the Virgin Group of Companies in 2007*
http://youtu.be/1ky-l0RQ_u(e)
http://www.virginaustralia.com/au/en/about-us/media/2012/WONDERFUL-CAMPAIGN/
http://careers.virginmedia.com/opportunities/growth/index.html
http://www.scribd.com/doc/13315487/Virgin-MobileThe-marketing-strategies
Multi-Product Diversification Strategies
Unrelated Diversification
A group of businesses or conglomerate that their subsidiaries or group of companies have nothing to do with each other

The companies that are owned by the conglomerate do not share any of the core competencies between businesses

The companies that are owned by the conglomerate are unable to share any of the resources that are used by their other companies
Related Constrained Diversification
Moderate to High Levels of Diversification

Economies of scope

Firms businesses are related
-Low corporate, high operational

Share resources, activities to make and sell products
Ian Jurman
Imran Khanbhai
Maggie Tierney
Hannah Moon
Agenda
We are going to provide examples of companies for each of the following Strategies of Diversification
Unrelated Diversification - Virgin Group
Related Constrained Diversification - Campbell's
Related Linked Diversification - General Electric
Both Operational and Corporate Relatedness - Disney
Explain why it fits that category
Simultaneous Operational and Corporate Relatedness
Virgin Group
The Walt Disney Company
Owned by Sir Richard Branson
Employs more than 50,000 people around the world in 50 countries
Global revenues of $24 billion in 2012
Has launched over 200 branded companies with the Virgin name
Most valuable Virgin Brands
Virgin Airlines (America, Atlantic, Australia)
Virgin Mobile (9 countries including USA, Australia, Canada, and India)
Virgin Train (UK)
General Electric
Related Linked Diversification
Virgin Airlines
Inbound Logistics
Planes built from suppliers
Operations
Engineers
Ground/Flight Operations
Network Operations
Marketing & Sales
Award Winning Service, S'Wonderful Campaign
Target Market
Operational Relatedness = Sharing primary tangible resources and activities

Corporate Relatedness = Firm successfully transfers corporate level core competencies into its different businesses.

BOTH? = The ability to simultaneously create economies of scope by sharing activities (operational relatedness) and transferring core competencies (corporate relatedness).



OPERATIONAL RELATEDNESS:
Production Sets (Touchstone, Hollywood Pictures)
Resources/Activities of film
Distribution Channels
Consistency of movie themes (Lion King)
Technology

CORPORATE RELATEDNESS:
Core competency ANIMATRONICS: transferred to different SBU's
Core competency CROSS SELLING
Core competency KNOWLEDGE OF CONSUMER TRENDS
Core competency PRODUCT PROMOTION: knowledge transferred


DEFINITION: A process that takes place when a business expands its activities into product lines that are similar to those it currently offers.

Firms using a related diversification multiproduct strategy try to create economies of scope.

Economies of scope are cost savings the firm accrues when it successfully transfers corporate-level core competencies into its business.

General Electric has six strategic business units (SBU's)
5 Major segments
General Energy
General Technology Infrastructure
General Capital Finance
General Consumer
General Industrial
Major U.S. corporation
One of the largest companies in the world.
Incorporated in 1892, acquiring all the assets of the Edison General Electric Co.
In 1986 GE purchased NBC.

General Electric Core Competencies - Three Aspects
1. Management innovation
Jack Welch (CEO) reduced the levels of organization
Information can be communicated directly
Improved organizational performance

2. Product innovation
Paid attention to product’s brand innovations and functional innovations
ADD importance to the innovation of the product value-added and service innovation.

3. Employing innovation
Concept: talents are everything, and who owns is the biggest winner
Continually supplies challenging work to staffs for mobilizing their enthusiasm and increasing organization performance

Founded in 1869
CEO- Denise Morrison
120 countries
Global revenue- 7.7 billion
Convenience food products

3 segments
-Simple meals
-Baked snacks
-Health beverages
Campbell's
Operational Relatedness

Use same warehouses

Nationwide transportation

Suppliers- similar ingredients


Notable Mention: NIKE
Nike's Operational Relatedness:
Factories
Distribution Channels
Logistics


Nike's Corporate Relatedness:
Innovation
Human Resource Management

Conclusion
1) Unrelated Diversification:
Low levels of operational and corporate relatedness
Companies have little to do with each other
Virgin


2) Related Operational Diversification:
High levels of operational relatedness, low levels of corporate relatedness
Lots of resource and activity sharing-economies of scope
Campbell's

3) Related Linked Diversification:
High levels of corporate relatedness, low levels of operational.
Companies successfully transferring corporate level core competencies into it's different businesses.
GE

4) Simultaneous Operational/Corporate Relatedness:
Sharing both tangible primary/secondary resources and activities and intangible knowledge about core competencies
May lead to dis economies of scope
Walt Disney, Nike
Virgin Mobile
Leadership programs
Edison Engineering Development Program (EEDP)

The Human Resources Leadership Program (HRLP)

The Experienced Commercial Leadership Program (ECLP)

Business Specific Programs
Diversification-more about Five segments
Inbound Logistics
Phone manufacturers
Operations
Cross Division Multiple Access Network (CDMA) provided by Sprint, and customer service
Marketing and Sales
1. GE Energy Infrastructure
Stem, gas, generators, combined cycle systems, and renewable energy solution and water treatment equipment and services.

2. GE Technology Infrastructure
Jet engines, turboprop and turbo shaft engines and its replacement parts for using in commercial and military aircraft.

3. GE Capital Finance
Commercial lending and leasing products to distributors, and end-users of equipment and capital assets.

4. GE NBC Universal segment
Distribution and operation of films and television programs.

5. GE Consumer & Industrial
Various lighting products, home appliances and control products.

Core competencies
Superior flying experience at a low cost
Friendly environment & customer service
Core competencies
Ability to have low prices for service

Inbound Logistics
Planes
Operations
Engineers
Ground/Air Operations
Network Operations
Marketing
Award winning service with on-flight entertainment
S'Wonderful Campaign
Inbound Logistics
Phones from manufacturers
Operations
Field Engineers/Technicians
VM IT
Customer Service/Retention
Marketing
How they improve the lives of everyone through products and mobile service
Full transcript