response to each (2) discussion post below.

Xiaolong Li

Class,

Before I can decide on which one is better, I want to lay out the two definitions. According to chapter 8, related diversification is based on value chain matchups with respect to key value chain activities (Thompson et al., 2021, pg. 229). It usually occurs when the company moves its existing businesses into another new similar businesses model concept. While on the other hand, µsinesses are said to be unrelated when the resource requirements and key value chain activities are so dissimilar that not competitively important cross-business commonalities exist(Thompson et al., 2021, pg. 229).

I would choose related diversification when it comes to job security because it has lower risk rate than that of unrelated diversification. Oppositely, unrelated diversification can be more challenging since it takes time to get to another field and make profits. According to my research, unrelated diversification provides the opportunity to change to industries that are more profitable. In addition, when the firm’s primary business is in a highly fluctuating industry, a company can reduce its risk by diversifying into unrelated businesses (Porter, 2008).

My example would be Disney’s purchase of ABC television. As we know, Disney is super famous of animation films worldwide, while ABC television constantly buys and delivers Disneyàproduct on the screen for the past 11 years (Sabuda, 2009). Disney buying ABC has been a successful story of using related diversification strategy because just over a decade later, before Disney’s next big acquisition push, revenue had jumped more than 70% earnings per share increased 50% (Gara, 2017).

References:

Gara, A. (2017, May 23). Disneyà1995 Deal For ABC Made Buffett Billions By Marrying Mickey Mouse With SportsCenter. Forbes. https://www.forbes.com/sites/antoinegara/2017/05/2…

Porter, M. E. (2008). Competitive Advantage: Creating and Sustaining Superior Performance. Simon and Schuster.

Sabuda, R. (2009). ABC Disney (Anniversary Edition). Disney Press.

Thompson, A., Peteraf, M., Gamble, J., & Strickland, A. (2021). Crafting & Executing Strategy: The Quest for Competitive Advantage: Concepts and Cases (23rd ed.). McGraw-Hill Higher Education (US). https://full-bookshelf.vitalsource.com/books/9781264250165

Patricia Stewart

Hello Dr. Reyes and class,
Usually, associated diversification when entering a new business with significant likenesses with another company’s standing businesses is more knowledgeable than distinct diversification entering a new business with deficiencies such likenesses. Geographic diversification is another strategy for synergy (Thompson, 2022, p. 226). The businessàCEO opts to acquire other companies for expansion. An acquisition or control premium refers to the quantity by which the cost presented surpasses the target businessàpre-acquisition market worth or stock price (Thompson, 2022, p. 226). While acquiring another company can be quite pricing, corporations enter into corporate venturing or new venture development. Corporate venturing is evolving into a new industry as an extension of a business that launches business operations (Thompson, 2022, p. 227).
There are numerous reasons a business may contemplate diversification. Diversification strategies can assist in alleviating the threat of a business functioning solely in one field. If an industry faces issues, its presence in other sectors can help soften the effects. Businesses may also diversify within their area. Related diversification is when an existing business venture acquires another company in a similar industry. An example is Disney purchasing Marvel in entertainment (Bond, 2019). The strategy is more straightforward because the company knows the industry.
Research shows that a companyàproduct diversification and partnership strategies must be handled differently based on the type of product complexity, expansion, and market tenure (Lee et al., 2022). On the contrary, an unrelated diversification seems more complicated because the acquiring company strategy has to do more research and development due to operating in different industries. An example of this is Amazon purchasing Whole Foods. Many will say that a wiser strategy would have been buying Aldi because the prices at Aldi are more affordable than those at Whole Foods (Lahart & Jakab, 2017). In this case, unrelated diversification is better because Amazon has brought quality organic products at a lower price to consumers.
References,
Bond, P. (2019). Disney’s New Endgame: Real Value in Its Studio. Hollywood Reporter, pp. 425, 56.
Kim, K., Lee, J., Hwang, J., & Kim, E. (2022). Related and unrelated product diversification and collaboration strategies: Comparison between the pharmaceutical and biopharmaceutical industries. The Journal of Product Innovation Management, 39(4), 559-580.
Lahart, J., & Jakab, S. (2017). Amazon’s Margin-Crusher Invades the Grocery Store; Amazon’s purchase of Whole Foods is a targeted bet on a part of the grocery business and is awful news for Kroger, Walmart. The Wall Street Journal. Eastern Edition, p. The Wall Street journal. Eastern edition, 2017.
Thompson, A. (2022). Crafting & executing strategy: the questing for competitive advantage: concepts and cases (23rd ed.). McGraw-Hill Higher Education.