Original written by professors David Allen and Arnaud Gorgeon at IE Business School. Original version, 21 May 2002. Last revised, 20 December 2007. (R.L.) Published by IE Publishing Department. María de Molina 13, 28006 – Madrid, Spain. ©2002 IE. Total or partial publication of this document without the express, written consent of IE is prohibited.
We are all familiar with the concept of diversification in finance. In this context, diversification is related to the concept of risk. A diversified portfolio is a portfolio that has been structured in such away as to spread risk. In the context of strategy, however, diversification has a different meaning. In this context, we will consider diversification as doing something new. Firms that are successful seek to transfer their winning business know-how to new activities. For these firms diversification means looking at new industries or new markets as exciting opportunities for growth and profits. Firms that have been successful but face mature, less profitable markets, frequently seek to regain old glory in new businesses. For these firms diversification is about survival, often including avoiding take-over. In all, diversification is about taking risks and venturing into the unknown to seek greater competitive advantage and /or higher profit. Diversification is a corporate strategy decision matter. It is a decision taken at the highest level that impacts on the fundamental direction of firm. Moving towards diversification has sometimes been compared to passing through the Bermuda triangle. While some firms succeed, many others get lost forever. In fact, in no other area of corporate strategy do so many companies made such disastrous decisions. Nonetheless, the attraction of growth and new opportunities continues to be irresistible for most companies.
You probably already know that the majority of big companies are diversified companies. Microsoft, Walt Disney, Telefónica, Respol, El Corte Inglés, Nokia, General Electric, Mitsubishi, Shell are all examples of diversified firms. What is vital is that each of these firms seeks to find a coherent path of profitable growth as it takes on new challenges.
What does the diversified company look like? Picture a diversified firm as a collection of individual businesses competing in diverse industry environments. In a diversified firm, corporate managers must craft a multi-business, multi-industry corporate strategy.
IE Business School
Barbadillo Winery and Sierra Morena Group Finalize their Strategic Alliance 08:00 a.m
Sanlucar winery Antonio Barbadillo and the Sierra Morena food group are finalizing a strategic alliance that will combine the synergies of their products (wines and Iberian pork products), as well as their use of traditional and new distribution channels and the launching of new offers in the market.
The two companies are undertaking regional and national market expansion, emulating alliances such as the one between the Osborne Group and Jabugo.
A letter of intent was signed yesterday by Pascual Caputto, Managing Director of Antonio Barbadillo, and José Enrique Rosenda, Managing Director of Sierra Morena. The strategic alliance seeks to divesify through a product range of “of extraordinary quality, as provided by the Sierra Morena Group,” using the recently created Sierra de Sevilla brand for acorn-fed hams.
Participating in Sierra de Sevilla are some hundred Sierra Norte de Sevilla livestock raisers, industrialists and investors who have joined together to make the area the processer and marketer of its own production. The alliance between Barbadillo and Sierra Morena will put 40,000 acorn-fed hams on the market in 2004. In 2008, the projection is for over 100,000 hams, with a turnover of €36 million.
Babío plans expansion across Galicia by 2004
Please join StudyMode to read the full document