INSTRUCTIONS: READ THE DISCUSSION QUESTION AND THE PEER RESPONSES. PROVIDE A COMMENT TO ALL PEERS. THE RESPONSE SHOULD BE ANALYTICAL AND WELL THOUGHT OF. INCLUDE AT LEAST 1 APA REFERENCE. ORIGINAL WORK ONLY. ANSWERS OF AT LEAST 150 WORDS EXCLUDING CITATIONS.
Using a business publication (Forbes, Wall Street Journal, Businessweek, Fortune, FastCompany) article, find a company that has expanded by diversification. Describe the type of diversification and how the diversification created value. Evaluate how successful you think the diversification will be in future (5 or 10 yrs, for instance). What issues or challenges is the diversification likely to cause?
PEER 1 RESPONSE:
Cracker Barrel is a company that maximizes the diversification concept. “A restaurant might have a gift shop to sell gifts tailored to the restaurant, its menu, or community, such as cookbooks, travel books and videos, souvenirs, and postcards” (Raines, n.d., para. 3). Cracker Barrel is quite famous for its retail store once you walk into the doors, not to mention the rocker chairs that almost every customer sits on while playing checkers prior to or departing their meal in the restaurant portion of the store. “Cracker Barrel is expanding its retail offerings to appeal to millennials with retro T-shirts, vinyl records and old-school candies and sodas” (Tristano, 2017, para. 10). Customers have the option to browse the store while they wait for an available seat in the restaurant. According to Dyer, Godfrey, Jensen & Bryce (2016), Cracker Barrel uses the expansion type of diversification which allows a company to expand from its normal operations. The organization not only serves food but expands to sell a variety of other items in the country store to appeal to all its consumers.
I feel that Cracker Barrel will still be successful 5 or 10 years down the road. Their food is one-of-a-kind and their unique country store attracts almost every single person that visits the store. Together, the experience is part of the price one pays when they visit the store. If diversification isn’t approached with caution, the result can be overextension of a company’s resources” (Xaxx, n.d., para. 2). If Cracker Barrel’s retail store wasn’t making profit or the required sales to keep it afloat, the restaurant would be wasting the resources to operate the retail part of the store. The costs associated with establishing a diversified business can also be a challenge for business owners especially if the expanded business is in a separate facility.
PEER 2 RESPONSE:
Coca Cola is no longer just making sugary products that deteriorate your teeth while expanding the waistline. The company is actively expanding their beverage portfolio as the consumption of carbonated soft drinks continues to decline in favor of healthier options (Forbes, 2016). By diversifying into other ready-to-drink products, Coca Cola can follow the demands and preferences of consumers. If Coca Cola does not expand into these new product offerings, then the competition will certainly step in to steal consumers form Coca Cola. While diversifying carries some risk the new product offerings from Coca Cola are not all that different from their soda products. While sodas, teas, and ready to drink coffee product are very different from each other and utilize different production methods, they are still adjacent to each other in the market because they are related enough in that they both seek to provide refreshment to the consumer while on the go (Dyer, Godfrey, Jensen & Bryce, 2016, p112). Coca Cola already operates an efficient distribution network where bottled and canned beverage products are distributed to gas stations, grocery stores and other vendors across the country. The introduction of these new products does not detract from their core product but instead complements the total offering of the company without extreme additions to production or logistics. I believe that Coca Cola has made a wise decision to expand their products and they should continue to anticipate and serve changing preferences of the consumer to experience success at the company.
PEER 3 RESPONSE:
GE is a company that is very diverse. GE’s businesses include medical devices, power generation, and household appliances. Within the power generation segment they sell gas turbines, generators, Integrated Gasification Combined Cycle technology (IGCC systems convert coal and other hydrocarbons into synthetic gas), steam turbines, nuclear reactors, nuclear fuel and support services, and motors and control systems for oil and gas extraction and mining. (Barron, 2011) In just that segment of the business they have an astonishing range of products. (Barron, 2011) Any one of these products would serve as a large and viable business in and of itself, but GE has them all rolled up under its corporate umbrella. (Barron, 2011) There are different levels of diversification. GE is a large company, but it competes in multiple segments of business. GE strength is leadership, because each company is controlled by one corporation. I feel that GE is strong, because it is competing in different markets, but I also feel this can be a company weakness. GE is an example of unrelated diversified firm, which is a company with many categories, and markets, with few if any links between them. (Jeff Dyer, 2016) GE is an example of a conglomerate. GE diversification will make the company strong in the future, but I feel the relationship with the government will hurt the company. GE needed money from the Obama administration to stay in business, which can be devastating. GE might lose ground with the Trump administration, because wind technology, and green business is not high on the new presidents list. One issue with diversification I seen firsthand, because of the housing market. GE bought Jacuzzi, which was a good company at the height of the housing boom. When the housing market crashed it affected Jacuzzi’s business. GE lost money when it bought Jacuzzi, because the company lost a major portion of business. Diversification can help a company, but unforeseen events can be catastrophic to profits. I feel GE will do the same for the next five years, unless the company changes direction to something very different.