The importance of diversification
Diversification is 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. Most investment professionals agree that, although it does not guarantee against loss, diversification is the most important component of reaching long-range financial goals while minimizing risk.
Avoiding Downturns. A conservative reason to diversify is to avoid major repercussions when an industry or sector suffers a downturn. Some single-business or single-product organizations couldn't survive a lengthy decline in their industry. A fashion retailer often
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The following four objectives appear to motivate most decisions to diversify:
• To grow. Growth seems to be an implicit objective in nearly all organizations, and many managers pursue diversification strategies in order to maintain growth in sales and profitability beyond what their firms' core businesses can provide. Stock markets appear to reward growth companies, which may further encourage many managers to pursue growth through diversification.
• To more fully utilize existing resources and capabilities. Managers may also pursue diversification strategies because they believe their firms possess underutilized resources or capabilities that can be further exploited by diversifying into other markets or industries. Obvious examples of underutilized resources include factories or distribution channels operating below capacity, but underutilized capabilities might also include skills at sales and marketing as well as general management skill and
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As with diversification success, there are many reasons that could explain why diversification strategies are often unsuccessful.
• Market volatility and entering into a new venture within such turbulence could be one potential reason why diversification strategies that are undertaken can refuse to yield success.
• Another reason would be focusing on the potential upside and failing to understand difficult conditions. If "rewards for managers are usually greater when a firm is pursuing a growth strategy," focusing on these rewards as opposed to conditions that surround the diversification strategy might be where the failure lies.
Additionally, some diversification strategies such as mergers might not succeed because of lack of institutional support. Having the right personnel that can facilitate the strategy is key, ensuring that "well suited top executives are to manage that effort." Some diversification strategies simply cost too much money to initiate and sustain, taking away focus from the core success that organizations had experienced. These are reasons why diversification strategies can fail.
Mergers and
1 Organizational Profile An Organizational Profile Lockheed Martin Chad Bailey University of Louisville ELFH 442 May 29, 2015 Lockheed Martin Organizational Profile Lockheed Martin is an advanced technology company that specializes in defense, aerospace and security. Bethesda, Maryland is the headquarters for this large cooperation that employs approximately 112,000 people worldwide (Lockheed Martin Corporation, 2015). Lockheed Martin as the corporation exists today was not always the case.
Different diversities of many human populations believe Canada is one of the best places to live in. What is their reason for this belief? Canada is home to many citizens who take pride in their identities that set them apart from other people. Social, economic, and political factors can influence the identities of many Canadians today. Society in Canada differs from other countries and provides a safe atmosphere for all citizens.
Diversity may mean different things to different people. To me, diversity is exactly that, being different and unique. Diversity makes the world a beautiful place to be, and full of interesting and different people. The beauty of human civilization lies in its diverse groups and cultures.
Victoria Secret was profitable enough in their first year, for the company to open four more physical locations, as well as a mail order catalogue. Although Roy Raymond’s policy was initially profitable, but as we will discuss in the later parts of this paper, it also had its downsides that almost led to the bankruptcy of Victoria Secret. Today, Victoria Secret is a multi billion dollar conglomerate with more than a thousand stores in more than 180 countries generating an annual income of over five billion. 2. PESTEL ANALYSIS The external environment of a company can affect everything from company policies, finances, sales, targeted customers and can be a deciding factor in whether the company remains for another season.
These important resources are assets of a business that supports their companies in production and transportation.
3.0 Concepts 3.1 Resources and Capabilities In order to achieve and sustain competitive advantage, a business needs both resources and capabilities. Resources are assets that are owned or employed by an organization. The organization utilizes and uses these assets to carry out their business operations. Resources can be grouped either tangible assets or intangible assets.
- Diversity brings a variety of ideas and viewpoints to the organisation especially when creative problem solving is required. - Diversity increases passionate workers and makes work fun and
Apple Inc. embraces diversification strategy as a means of promoting its viability in the market. Largely, the creation of the three products lines compounds the sources of the company’s income. In fact, the company does not rely on a single source of income because the product design belongs to different categories. This strategy cushions the business from suffering risks of associated with depending on a single business. According Hitt, Ireland, and Hoskisson (2014, p.135), the benefit of handling many products is that when one product fail or does poorly in the market, the business is would shift its attention of the best performing products.
Companies succeed if their strategies are appropriate for their circumstances they face, feasible in respect of their resources, skills and capabilities and desirable to their important stakeholders-those individuals and groups, both internal and external, who have a stake in the behaviour. or expectations of the organization’s performance and fluencies over the business. They include employees, managers, shareholders, suppliers, customers or clients, trade unions and the communities local and national in which the organisation operates. Companies fail when their strategies are failed to meet the expectations of these stakeholders or produce outcomes which are undesirable to them. So it needs to consider all implications of a shift in strategy, not simply the effect a specific stakeholders
For instance, the world population is aging (OECD, 2013a), therefore, changes in demographic may be dangerous to solely teenage-oriented apparel firms based on the fact that competition for that segment is gradually diminishing (e.g. Coneen by design ltd). Nevertheless, these could be an opportunity for open and more flexible existing fashion retailers. Nowadays, customers are demanding for convenient shopping experience due to limited time in accessing or going to the market in person. Therefore, fashion or clothing firms with quality and easy to navigate web page will attract more customer (Chaturvedi, Martich, Ruwadi & Ulker, 2013).
POLITICAL Political factors can often give a big impact on the business of a company. Often this factor is not in the hand of the organization. Several aspects of government policies can make a huge difference. However, all firls are required to follow the law. It is the responsibility of the organization to find how upcoming legislations can affect their activities.
COST STRUCTURE OF SAMSUNG Low cost structure of Samsung and high responsiveness to economic events has made Samsung more competitive. For example, initially Samsung focused more on volume and domination on market rather than increasing profitability. However, in 1990s, during the Asian financial crisis, Samsung cut costs and reemphasized product quality and manufacturing flexibility, which allowed its consumer electronics move from project phase to store shelves within next six months. Under the resources-based view of strategic management, effective resources available to a firm, as well as the competency of a firm is responsible in affecting competitive advantage received by a firm.
Diminishing of risk towards zero is as a result of diversification, which can reduce firm-specific risk. Diversification does not however reduce market risk, to
We understand that each individual is unique and recognize our individual difference. As a group we will be focusing on age, gender and race. Why its important to manage these diversities, what will happen if they aren't managed and how these applied in the workplace and
McDonald’s is the largest fast food restaurant chain in the United States and represent the largest restaurant company in the world, both in terms of customer served and revenue generated. In 2014 IBISWorld market research estimated MCD held an 18.6 % of market share of the entire global fast food industry; Burger King in at just 4.6%. Under franchising visionary Ray Kroc, McDonald 's became the world 's premier food brand by selling the rights to operate a McDonald 's store. With this model, MCD keeps overhead costs down and lets local owners deal with individual units, while food costs remain low and service remains fast for a culture increasingly on the go.