business strategy 14

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“Diversification” Please respond to the following:

  • Suggest one way Coke Cola could increase its level of value-creating diversification. Provide specific examples to support your response.
  • Building on the topic above, determine how diversified the company you research could become before it created a negative impact on the company’s bottom line. Explain your rationale.

PART A – PLEASE RESPOND TO CLASSMATE DISCUSSION WHETHER YOU AGREE OR NOT & A DETAILED WHY: I have chosen the firm that I mentioned in last week’s discussion, Sheetz. Sheetz has diversified in certain areas throughout their history (1). In 1985, they presented their “MTO” or Made-To-Order product line of sandwiches, salads, breakfast sandwiches, and a few other items. This entry into the prepared on-site food versus pre-made and pre-packed food was widely expanded in the early 1990’s to most stores. Today this is a key competitive advantage of Sheetz.

To increase its level of value-creating diversification today, Sheetz might try vertical-integration and acquire a key supplier, such as a small manufacturer of luncheon meats, thus reducing their costs while simultaneously adding to the revenue of the company by having a new line of business.This would need to be carefully analyzed and managed, obviously, as this entry into the production space is not a core competency within Sheetz today. They would likely want to retain key executive management from the acquired company through generous retention packages.

Sheetz might instead choose to expand internationally by either acquiring a similar firm overseas or starting a new line of business from scratch. This would almost certainly entail a transfer of some of their top executives, perhaps only temporarily, but maybe permanently. I feel this choice would negatively impact Sheetz as it would spread their talent too thin. They might be able to keep it a short-term loss, but I believe it would be incredibly difficult to do so. This type of market share grab is very risky and should only be taken if they can ensure the existing business will not be affected. I feel diversification in the quick service/convenience store business is going to be very difficult without some sort of acquisition of both corporate executive talent and market share, regardless of the strategy chosen.

Part B – PLEASE RESPOND TO CLASSMATE DISCUSSION WHETHER YOU AGREE OR NOT & A DETAILED WHY: Suggest one way the company you researched could increase its level of value-creating diversification. Provide specific examples to support your response. – The company I decide to talk about is HEB which is a grocery store in Texas that started from a small family. HEB already participates in diversification with its suppliers to make sure they are able to support the needs of their customers.

I believe in HEB participated in the operational relatedness: Sharing Activities would increase their level of value-creating diversification. By doing this they would partner with other businesses to share activities to create value. For instance, they can support and share technology development or share inventory delivery systems or warehouse facilities with another local business to meet needs of consumers and boost sales.

Building on the topic above, determine how diversified the company you research could become before it created a negative impact on the company’s bottom line. Explain your rationale. – Diversification has its strengths and weakness with company’s since this can be unpredictable. Company’s need to do a lot of planning and research strategy to see if it will be beneficial and see if it’s worth the process. For example if the shareholders urged the company to expand into other markets and something goes wrong they could lose profits and possible hurt their reputations.

 
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