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2. Diversified companies: advantages n disadvantages

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2. Diversified companies: advantages n disadvantages

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  • December 2013
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-Diversified companies: A company that has multiple, unrelated businesses. Unrelated businesses are those which require unique management expertise, have different end customers and produce different products or provide different services. -Some of the most well-known diversified companies include Hitachi, Toshiba and Lotte Group – which consists of over 60 business units, engaged in such diverse industries as candy manufacturing, hotels, fast food, retail, financial services, heavy chemicals, electronics, IT, publishing, and entertainment. Or in Vietnam: Hoang Anh Gia Lai group which start up as small furniture producer then the company diversified into other industries such as: rubber, football financial..

-Advantages:
One of the benefits of being a diversified company is that it buffers a company from dramatic fluctuations in any one industry sector •Companies that are diversified are more likely to see connections between different markets that can be exploited, for example, because they are active in multiple markets and they track trends carefully. •Diversification can also allow a company to keep up with changing market dynamics more quickly. -Disadvantages:

Diversification has the highest level of risk and requires the most careful investigation. Going into an unknown market with an unfamiliar product offering means a lack of experience in the new skills and techniques required. Therefore, the company puts itself in a great uncertainty. •this model is also less likely to enable stockholders to realize significant gains or losses because it is not singularly focused on one business. -Because of the high risks explained above, many companies attempting to diversify have led to failure. However, there are a few good examples of successful diversification: •Walt Disney moved from producing animated movies to theme parks and vacation properties •Canon diversified from a camera-making company into producing an entirely new range of...