...To Diversify or not to Diversify Contemporary Business The companies that I selected to write about are Walt Disney Company and the National Semiconductor Corporation. The Walt Disney Company is my example of a successful diversification story. The Walt Disney Company was founded in 1923 as a cartoon studio by Walter Elias Disney. The company has since become an entertainment powerhouse that pervades film, television, radio, vacation destinations, merchandise, music, cruise ships and more. After World War Two, when demand for its film-making services that had been used heavily by the U.S. government during the war effort waned, the company, driven by financial motivation, expanded its footprint into other integrated market segments. This approach not only hedged the company’s bets insofar as financial success was concerned, but tied the offerings together, reinforcing the company’s already strong brand across seemingly disparate market segments. As the company grew, Disney diversified production beyond cartoons and animated movies. Treasure Island, released in 1950, was the studio’s first live-action film, and the company formed Buena Vista Distribution a few years later. With its own in-house distribution company, Disney could continue to churn out movies while significantly saving on distribution costs. Live-action hits such as Swiss Family Robinson in 1960 and Mary Poppins in 1964 followed. Disney's TV debut came around...
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...Review Questions 2. What are the seven reasons why Xerox should be motivated to diversify their workforce? Illustrate how Xerox shows it values workplace diversity. The reasons why Xerox should be motivated to diversify their workforce is more talent will be employed at Xerox if employees of all cultures and race are hired because diversity is a key to achieving critical business results. Furthermore, there will be more knowledge sharing employees can share cultural traits, market demographics and help develop companies develop robust knowledge management and market intelligence systems that create productive people and an innovative company by recognizing and respecting diversity and empowering individuality. Enhanced Productivity by processing varied skills, competencies and capabilities of different races and cultures, Xerox can increase its productivity worldwide (Xerox) that will make them a prominent player despite the economic slowdown in technology spending. Reduced Discrimination at Xerox woman and minorities make up for 52% of the workforce and 42.5% of Xerox senior executives are women or people of color or both (Xerox). This motivates employees in a way that they feel like they appreciated and valued. Besides, its make them challenge each other’s underlying assumptions, freeing everybody from convention and orthodoxy. Xerox has strict discrimination policies as well. With the inclusion of women in the workforce, Xerox developed a form of “flex time” that allowed...
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.... How Can Azerbaijan Diversify Its Economy Away from Petroleum Dependence to More Sustainable Economic Development? June 2012 By Nurana Mammadova* It is known that the "black gold" is the main supplier for the state budget of the Azerbaijan Republic. Approximately 74% of the state budget derives from the proceeds of oil and petroleum products, and therefore the economy is almost entirely based on the oil industry. All this warns us against a very disastrous problem. If we have abundant oil resources, it does not mean necessarily that we should generally use only them. After all, the rest of industry, agriculture, services, and so on remain on the sidelines. At the same time, there is potentiality for the development of other economic sectors, namely the agriculture, industry and other sectors. The problem is that as a result of Azerbaijan's economy dependence on oil, we did not pay much attention to the comprehensive development of our economy. And this in turn is negative for the economic development: that’s the reason why Azerbaijan is not able to be classified as a more developed country. In addition, it is known that the GDP index is the economic indicator for the development of a country. In the eventuality that a large part of the GDP derives from the exploitation of natural resources, this country can hardly be considered as developed. For example, Saudi Arabia's per capita GDP is almost higher than...
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...initiatives to diversify its product lineup. Recent acquisitions of Evolution Fresh, Tazo, and Teavana demonstrate this strategy. We believe these strategic moves broaden Starbucks’ product mix, allowing the company to better position itself globally. These acquisitions also signify the Although coffee will be Starbucks’ core business, the Company has taken initiatives to diversify its product lineup. Recent acquisitions of Evolution Fresh, Tazo, and Teavana demonstrate this strategy. We believe these strategic moves broaden Starbucks’ product mix, allowing the company to better position itself globally. These acquisitions also signify the Although coffee will be Starbucks’ core business, the Company has taken initiatives to diversify its product lineup. Recent acquisitions of Evolution Fresh, Tazo, and Teavana demonstrate this strategy. We believe these strategic moves broaden Starbucks’ product mix, allowing the company to better position itself globally. These acquisitions also signify the Although coffee will be Starbucks’ core business, the Company has taken initiatives to diversify its product lineup. Recent acquisitions of Evolution Fresh, Tazo, and Teavana demonstrate this strategy. We believe these strategic moves broaden Starbucks’ product mix, allowing the company to better position itself globally. These acquisitions also signify the Although coffee will be Starbucks’ core business, the Company has taken initiatives to diversify its product...
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...Paris), and television network (ABC 1995). 2. Walt Disney Company pursues several different ways to diversify: -The first step Walt Disney Company took to diversify itself was when they started to license out their cartoon characters allowing merchandizer to sell Disney products. This was a horizontal diversification strategy as Walt Disney Company did not control these vendors besides collecting on licensing fee and a portion of the merchandize profits. -The second step Walt Disney Company took to diversify itself was when they Greenfield invested to form their own film and home video distribution company (Buena Vista). This was a vertical forward integration effectively cutting out the middle man costs. -The third step Walt Disney Company took to diversify itself was Greenfield invested into the theme park industry. The theme park was a vertical forward diversification strategy that provided a different output to promote their cartoons. -The fourth step Walt Disney Company took to diversify itself was when it Greenfield invested into the resort and hotel industry. The hotels and resorts although considered horizontal in the diversification strategy with the Walt Disney Company, it provided the support for the theme parks to keep customers closer to the parks while delivering the same theme feeling as the park. -The fifth step Walt Disney Company took to diversify itself was when it acquired CapCities/ABC to own a programming distribution channel. This was a...
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...and crucial than ever before (Thompson, Strickland, & Gamble, 2010). There is a greater need for strategy and decision making because the diversified company is venturing out into other [outside] industries. "But in a diversified company, the strategy -making challenge involves assessing multiple industry environments and developing a set of business strategies, one for each industry arena in which the diversified company operates" (Thompson, et al., 2010, p. 239). For these reasons alone, there needs to be extensive research and knowledge done into the arenas of anticipated diversifications. Diversification is a very important and vital move for any business or company. A business must only know the need to diversify. It must also be aware of when to diversify. As stated by Arthur Thompson, A.J. Strickland, and John Gamble (2010): So long as a company has its hands full trying to capitalize on profitable growth opportunities in its present industry, there is no urgency to pursue diversification. The big risk of a single-business company, of course, is having all of the firm's eggs in one industry basket. If the demand for the industry's product is eroded by the appearance of alternative technologies, substitute products [or services], or fast-shifting buyer preferences, or if the industry becomes...
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...Starbucks’ Mission Statement Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow. The following six guiding principles will help us measure the appropriateness of our decisions: • Provide a great work environment and treat each other with respect and dignity. • Embrace diversity as an essential component in the way we do business. • Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee. • Develop enthusiastically satisfied customers all of the time. • Contribute positively to our communities and our environment. • Recognize that profitability is essential to our future success. Corporate Objectives 1. Establish Starbucks as the most recognized and respected brand in the world 2. Achieve rapid growth through national and global retail store expansion opportunities – target 25,000 to 30,000 stores worldwide by 2013 3. Increase revenue through innovation of new products, and consistent delivery of the Starbucks experience 4. Increase U.S. and global market share – Target >7 percent U.S. and >1 percent worldwide 5. Secure a reliable supply of high-quality coffee beans, at stable prices, through environmentally and socially responsible means 6. Leverage the Starbucks’ brand through diversified product offerings Corporate Strategies 1. Market penetration of retail stores 2. Global market development 3. Backward vertical integration...
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...The Theory Why and When Companies Should Diversify Christine Porter Financial Management Dr. Morrison February 24, 2015 What is Diversification? It’s a technique that reduces risk by allocating investments among various financial instruments, industries and other categories. It aims to maximize return by investing in different areas that would each react differently to the same event. Although diversification does not guarantee against loss it is the most important component of reaching long-range financial goals while minimizing risk (investopia.com). Simply put, diversification can reduce risk. Using diversification as a strategy will help to develop a business in entering new production lines, or markets, and reduce the risk by spreading investments. However, can a business reduce its risk with the appropriate diversification techniques, and when is the right time to diversify, or not. We will begin to explore the ideology of diversification. Through diversification some risks can be eliminated, however no matter how much you implement diversification, businesses never reduce their risk down to zero. (Financial Management, Principles and Applications, Chapter. 8, pg. 221). Looking closer at the concept of diversification, the idea for a business, or investors is to create a portfolio that will include multiple investments in order to reduce risk. For example, Everything But Water sells swimwear, during...
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...is defined as a process when the firm enters into a new product category than the industry that it is currently working in. Thus, diversification leads to the firm entering into new markets by offering new product range. Currently, many companies have been initiating to enter into diversification since it helps to reduce their dependency on a single product range and its limited market. Over a period of time, many companies have been diversifying to reduce their risks. For instance, Wipro which is an IT firm few years back diversified into fast moving consumer goods industry, Giorgio Armani which is a fashion luxury goods brand diversified into hotel industry, Hindustan unilever limited diversified into water purifiers etc. A firm can diversify into three categories: Concentric diversification: in this type of diversification the companies would like to generate those product categories which require the same technology inputs. Thus, the company will be using the same research and development and technological knowhow and enter into a new product category. For instance, for instance, Maggie has introduced soups and ketchups where the technological efforts in the food processing market remain the same but the product is new. Conglomerate diversification: in this type of diversification, the company is entering into a new industry with a new product range which is not similar to its products in any form. for example: Wipro which is a IT firm few years back diversified into fast...
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...Chapter 6 – Review Questions By Aaron Dowling What is Corporate Level Strategy and why is it important? The formal definition of a corporate level strategy is ‘an action taken to gain a competitive advantage through the selection and management of a mix of businesses competing in several industries or product markets’. An example of Virgin Worldwide’s corporate level strategy is the corporate synergies between its business units, allowing individual businesses to focus on and develop as autonomous enterprises under a single unified brand name. This decentralization of organizational structure and decision making allows an entrepreneurial environment for managers to pursue their businesses effectively, while avoiding the bureaucracy associated with large centralised corporations. At the same time, the individual businesses benefit from the world-wide, inter-industrial reputation of the parent corporation’s Virgin brand and are able utilize this brand recognition in their marketing efforts. The corporate level strategy is important in that it is the defining factor of what makes the ‘whole’ of the corporation add up to greater than the sum of its parts. It sets the corporation apart from its competitors and is unique to the particular company. What are the different levels of diversification firms can pursue by using different corporate-level strategies? There are 3 distinct levels of diversification firms can pursue by using different corporate-level strategies. These...
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...#2 Diversify across asset class variants. Within each asset class, you can practice further diversification. For instance, equities have many representations in the mutual fund world. Variants or subclasses refer to more granular characteristics of the asset class. Here are some examples: Equities can vary according to: * the size of companies represented in a “basket” (e.g. large vs medium vs small cap stocks) * the way the stocks’ prices move as the stocks chart their growth (e.g. growth vs value stocks) * the geographical market in which the stock moves (e.g. domestic vs international) Bonds can vary according to: * their maturity dates (e.g. short term vs long term bonds) * their level of risk (e.g. junk bonds, anyone?) * who issues the bond (e.g. government vs corporate) * how they pay out Cash vehicles vary mostly according to rates of return and level of security offered, which are usually characteristics that are inversely proportional to each other. Generally, within the investment world, the higher the rate of return, the less stable the fund value is expected to be. Tip: You can find additional diversification down to the class variant level from mutual fund institutitions, Treasury Direct, or online stock brokers who can assist with giving you more information. Try Morningstar as well to help you with more details on this topic. Note though that most of the time, you don’t really need to seek this kind...
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...“Why You Should Diversify Your Portfolio Outside the U.S. Dollar” Cole Stevenson Business Economics Missouri Baptist University When investing, knowing the economy is crucial. This paper begs the question, what does it mean to “Diversify your portfolio”? After all, that is what we have all been told our entire life. It is the first lesson one learns in every financial education class; the concept that we all need to “diversify our portfolio”, “not put all our eggs in one basket”, “have stocks, bonds, cash, and CD’s”, etc. This is the standard route to financial success and I have not come across many people who would argue that position. As a matter of fact, I would not argue that we should not diversify. Actually, my point is just the opposite. We need to have more diversity. You see, the question begs, just how diverse are all of those things? Do they not all depend on one sole currency? If I were to sell my stocks, I would get dollars in return. When I cash in my bonds, I will get dollars back. When my CD’s reach maturity, what do I get out of it? You guessed it, dollars. This points to the plain and simple fact, that we need more diversity outside of the U.S. dollar. Precious metals and foreign currencies make that possible. James Cooper wrote in the “Business Outlook”, “Since the greenback's peak in early 2002, it has dropped 35% against the euro, 28% vs. a trade-weighted basket of major currencies, and 18% vs. the currencies of...
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...1 Causality and the Diversification Discount 1 Introduction Does corporate diversification, i.e. the expansion of a firm’s business operations into unrelated areas, destroy shareholder value? The wealth effects associated with conglomerates have been controversially discussed in scholarly journals ever since the seminal papers of Lang and Stulz (1994) and Berger and Ofek (1995) suggested that diversification reduces shareholder value. Both find that conglomerates are attributed with a lower market value than a portfolio of comparable focussed firms operating in the same businesses as the conglomerate. This finding seemed to suggest the hypothesis of a “diversification discount”. In line with this Scharfstein and Stein (2000) postulate "it has become almost axiomatic among researchers in finance and strategy that a policy of corporate diversification is typically value reducing.” Yet, subsequently financial scholars have challenged this dogma of a diversification discount. They did so with respect to the method used (Mansi and Reeb (2002); Glaser and Müller (2010)) and the causal interference (Graham et al. (2002); Campa and Kedia (2002); Villalonga (2004)). Taking these latest developments into account, the empirical evidence on the value effects of corporate diversification is mixed. The controversy that has evolved around these wealth effects provides a suitable setting to investigate the pitfalls associated with causal analysis and interference in empirical...
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...* Credit or Default Risk - Credit risk is the risk that a company or individual will be unable to pay the contractual interest or principal on its debt obligations. This type of risk is of particular concern to investors who hold bonds in their portfolios. Government bonds, especially those issued by the federal government, have the least amount of default risk and the lowest returns, while corporate bonds tend to have the highest amount of default risk but also higher interest rates. Bonds with a lower chance of default are considered to be investment grade, while bonds with higher chances are considered to be junk bonds. * Business Risk: This is the risk that issuers of an investment may run into financial difficulties and not be able to live up to market expectations. For example, a company’s profits may be hurt by a lawsuit, a change in management or some other event. * Interest Rate Risk: The risk caused by changes in the general level of interest rates in the marketplace. This type of risk is most apparent in the bond market because bonds are issued at specific interest rates. Generally, a rise in interest rates will cause a decline in market prices of existing bonds, while a decline in interest rates tends to cause bond prices to rise. For example, say you buy a 30-year bond today with a 6% annual yield. If interest rates rise, a new 30-year bond may be issued with an 8% annual yield. The price of your bond drops because investors aren’t willing to pay full value...
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...Diversification Strategies When companies begin they develop a business plan that details what they intend to specialize in. For some, once they have reached a goal in one market they make decisions to venture out into other markets. In the world of business, that venturing out is called diversifying the company. According to Merriam-Webster’s online dictionary, to diversify is “to increase the variety of the products of; or to engage in varied operations.” (Merriam-Webster, 2012) In a business, when you produce a variety of goods or invest in different markets it is a strategy that provides a back-up in the event that one good or investment goes south. Diversification strategies can be either beneficial or harmful to a company. Comcast Corporation and Eastman Kodak Company are two companies that made the decision to diversify themselves, but it led to different outcomes. Comcast Corporation was originally founded in the early 1960s under the name, American Cable Systems, Inc. Initially, the company only served Tupelo, Mississippi. The company was also one of only a few community antenna television (CATV) services in the nation. The “CATV business was predicated on the fact that rural areas were underserved by commercial television stations which catered to large metropolitan areas.” (Comcast Corporation, 1999) The CATVs used huge antennas that pulled in distant signals to display the shows on television. If a household did not have one of those antennas they had...
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