Intensive strategies are used to support organizational growth. On the other hand, a generic strategy defines the general approach used for business competitiveness. This generic strategy supports business competitive advantage on the basis of cost reduction and low prices to attract customers.
Ford Motor Company’s organizational structure and its characteristics, advantages, and disadvantages are shown in this case study & analysis on the company. Skip to content Panmore Institute. Essays - largest database of quality sample essays and research papers on Ford Diversification Strategies. Integration and Diversification as Business Strategies-An Historical Analysis Alfred D. Chandler, Jr. 1 Massachusetts Institute of Technology ().
Explain the concept of diversification. Be able to apply the three tests for diversification. Distinguish related and unrelated diversification.
Firms using diversification strategies Involve a firm entering entirely new industries. While vertical integration involves a firm moving into a new part of a value chain that it is already is within, diversification requires moving into new value chains. Many firms accomplish this through a merger or an acquisition, while others expand into new industries without the involvement of another firm.
Three Tests for Diversification A proposed diversification move should pass three tests or it should be rejected. From competitive advantage to corporate strategy. Harvard Business Review, 65 3— How attractive is the industry that a firm is considering entering? Unless the industry has strong profit potential, entering it may be very risky.
How much will it cost to enter the industry? Executives need to be sure that their firm can recoup the expenses that it absorbs in order to diversify.
When Philip Morris bought 7Up in the late s, it paid four times what 7Up was actually worth. Making up these costs proved to be impossible and 7Up was sold in Will the new unit and the firm be better off? Unless one side or the other gains a competitive advantage, diversification should be avoided.
In the case of Philip Morris and 7Up, for example, neither side benefited significantly from joining together. Some firms that engage in related diversification aim to develop and exploit a core competency A skill set that is difficult for competitors to imitate, can be leveraged in different businesses, and contributes to the benefits enjoyed by customers within each business.
A core competency is a skill set that is difficult for competitors to imitate, can be leveraged in different businesses, and contributes to the benefits enjoyed by customers within each business.
The core competencies of the corporation. Harvard Business Review, 86 179— For example, Newell Rubbermaid is skilled at identifying underperforming brands and integrating them into their three business groups: Honda Motor Company provides a good example of leveraging a core competency through related diversification.
Although Honda is best known for its cars and trucks, the company actually started out in the motorcycle business. Through competing in this business, Honda developed a unique ability to build small and reliable engines. When executives decided to diversify into the automobile industry, Honda was successful in part because it leveraged this ability within its new business.
Honda also applied its engine-building skills in the all-terrain vehicle, lawn mower, and boat motor industries.
Image courtesy of Wikimedia, http: Sometimes the benefits of related diversification that executives hope to enjoy are never achieved. Both soft drinks and cigarettes are products that consumers do not need. Companies must convince consumers to buy these products through marketing activities such as branding and advertising.
Thus, on the surface, the acquisition of 7Up by Philip Morris seemed to offer the potential for Philip Morris to take its existing marketing skills and apply them within a new industry.
Unfortunately, the possible benefits to 7Up never materialized. Unrelated Diversification Figure 8. Most unrelated diversification efforts, however, do not have happy endings.
Harley-Davidson, for example, once tried to sell Harley-branded bottled water. Starbucks tried to diversify into offering Starbucks-branded furniture. Both efforts were disasters.
Although Harley-Davidson and Starbucks both enjoy iconic brands, these strategic resources simply did not transfer effectively to the bottled water and furniture businesses. Lighter firm Zippo is currently trying to avoid this scenario. This brand has fueled eighty years of success for the firm.Diversification strategies involve firmly stepping beyond its existing industries and entering a new value chain.
Generally, related diversification (entering a new industry that has important similarities with a firm’s existing industries) is wiser than unrelated diversification (entering a .
Ford Motor Company’s generic strategy (Porter’s model) and intensive growth strategies are discussed in this case study & analysis on competitive advantage. Skip to content Panmore Institute. Diversification strategies involve firmly stepping beyond its existing industries and entering a new value chain.
Generally, related diversification (entering a new industry that has important similarities with a firm’s existing industries) is wiser than unrelated diversification .
IBM International Strategic Management Case: Ford Motor Company I. Strategic Profile Company overview: Ford Motor Company is one of the largest automobile manufacturers in the world which Henry Ford is the founder.
The company manufactures and distributes automobiles in . Ford Motor Company recently raised $ billion to fund investment in new technologies.
Competition in the auto sector with new driverless technology is intensifying. Ford is a leader in diversity & inclusion, and both remain key Ford business strategies. You’ll find diversity at every level of the company, from the boardroom to the design studio, from the plant floors to the engineering centers.