Diversification and the Multibusiness Company Read the overview below and comple
ID: 421671 • Letter: D
Question
Diversification and the Multibusiness Company
Read the overview below and complete the activities that follow.
CONCEPT REVIEW:
The purpose of diversification is to build shareholder value. Diversification builds shareholder value when a diversified group of businesses can perform better under the auspices of a single corporate parent than they would as independent, stand-alone businesses. The goal is to achieve not just a 1 + 1 = 2 result, but rather to realize important 1 + 1 = 3 performance benefits. Whether getting into a new business has the potential to enhance shareholder value hinges on whether a company’s entry into that business can pass the attractiveness test, the cost-of-entry test, and the better-off test. Entry into new businesses can take any of three forms: acquisition, internal start-up, or joint venture. The choice of which is best depends on: the firm’s resources and capabilities, the industry’s entry barriers, the importance of speed, and the relative costs. There are two fundamental approaches to diversification: into related businesses and into unrelated businesses. The rationale for related diversification is to benefit from strategic fit: Diversify into businesses with matchups along their respective value chains, and then capitalize on the strategic fit by sharing or transferring the resources and capabilities across matching value chain activities to gain competitive advantage. Unrelated diversification strategies surrender the competitive advantage potential of strategic fit at the value chain level in return for the potential that can be realized from superior corporate parenting or the sharing and transfer of generalized resources and capabilities. An outstanding corporate parent can benefit its businesses through (1) providing high-level oversight and making available other corporate resources, (2) allocating financial resources across the business portfolio, and (3) restructuring underperforming acquisitions.
The questions require you to identify the corporate strategy, the strategic fit between the business, and the possible acquisition targets that could improve shareholder value.
The Walt Disney Company is made up of the following businesses:
• Theme parks
• The Disney Cruise Line
• Resort properties
• Movie, video, and theatrical productions (for both children and adults)
• Television broadcasting (ABC, Disney Channel, Toon Disney, Classic Sports Network, ESPN and ESPN2, E!, Lifetime, and A&E networks)
• Radio broadcasting (Disney Radio)
• Musical recordings and sales of animation art
• Hockey Teams (Anaheim Mighty Ducks NHL franchise)
• Baseball Teams (Anaheim Angels Major League Baseball franchise—25 percent ownership)
• Books and magazine publishing
• Interactive software and Internet sites
• Retail shops (The Disney Store)
1. Based on the listing in the report, would you say that Walt Disney’s business lineup reflects a strategy of related diversification, unrelated diversification, or a combination related-unrelated diversification?
a.The company’s strategy is best characterized as related diversification since it operates one major core business that accounts for 50 to 80 percent of total revenues.
b. Walt Disney is pursuing an unrelated diversification strategy keyed to risk reduction and earnings stabilization.
c.Walt Disney’s strategy is best described as related diversification because of its ability to transfer core competencies and share knowledge between its divisions.
d.The company is pursuing unrelated diversification into dissimilar businesses.
e.The company’s strategy is a combination of related and unrelated diversification since it has a broad range of similar businesses in vastly unrelated industries.
2.What benefits are generated from any strategic fit existing between Disney’s businesses?
a.Strategic fit benefits exist only within its television broadcasting and cable operations.
b.Strategic fit benefits exist only between its dominant theme park business and its resort properties.
c.Strategic fit benefits existing between its lineup of businesses include cross-selling opportunities, economies of scope, and knowledge transfer.
d.No strategic fit opportunities exist since the company is pursuing unrelated diversification.
e.Only cost sharing in administrative activities since the company is pursuing a combination related-unrelated diversification strategy.
3.What types of companies should Walt Disney Company consider acquiring that might improve shareholder value?
a.Walt Disney’s lineup of businesses is not adding sufficient shareholder value and retrenchment to a more narrow range of businesses is appropriate.
b.Appropriate acquisition candidates would include automobile dealerships and additional cable networks.
c.The company should consider acquiring businesses that allow it to share resources or exploit value chain synergies such as video game companies or movie distribution companies.
d.Walt Disney should not consider new acquisitions, but should launch internally-developed new ventures in the technology sector.
e.Walt Disney should consider acquiring businesses that reduce risk and provide earnings stabilization such as restaurant chains and rental car companies.
Explanation / Answer
Whole foods market is one of the best organisations which process extreme diversification as well as better implementation of diversified strategies
Whole food market is one of the America's biggest organic and natural food retailers, world food market was not only America but the world's biggest organic and natural food retailer. World food market is basically an employee oriented organisation which focuses on growth of their employees that reflects in their working platform as well as the system. Organisation culture of the plant is very strong and contributes to the brand strength.
Whole Foods Market’s organisational culture is considered as one of the best work culture for an organisation and is a fine example of an employee oriented workplace and culture in an organisation. This specific organisational culture attract the customer to their products and their store which results in increased profits and sales.
Basic features of whole foods market's organisational cultures are as follows
? Team focus
Whole Foods Market’s basic strategy includes focusing on the teams. Most of the task of the company are designed to be done by 18 which improve their overall efficiency as well as the productivity of the human resource. By optimising the employee morale and reducing the turnover company has successfully implemented the team system into its and work structure. The core value of Whole Foods Market is “Supporting team member happiness and excellence.” when the culture of the organisation contribution we human resource management.
? Active participation
Company also introduced the active participation system into its organisation and supports the extensive employee participation in each and every job provided inside the company. For example employees select the team members according to their choices and mutual understanding for a better and productive work environment.
? Interactions out of work environment
Whole foods market also very well known for interactions other than formal inside it stores. Employees are in touch with each other and always keep discussing about random things inside the plane as well as discussing things with the customers as well. The specific practice reduces the gap between the customer and the employees which is directly related to the growth of the business. Whole foods market also focuses on creating social relationships within the Company organisation and culturally support the workers as well as the customers.
? Trasparency in workplace
Wholw food market is one of the most transparent work environment available in the USA. By creating transparent report which has to inform the stakeholders is a key thing of transparency within the organisation. Not only the stakeholders but whole foods market also provide this financial report to their employees. Financial report provision to the Employees make them understand the form situation in a better manner. By introducing transparency in the workplace company also helps in the human resource management which is done in resilience.
Whole foods market culture is one of the best culture in the business. This specific culture is based on high ethics and morals of employees as well as the working environment. Using their work culture as a tool company uses this specific culture to improve their Human Resource Management hence organisational culture of whole foods market is one of the strongest points of its key success
According to VRIO framework whole food market can be divided into following categories.
Value
Whole food markets have successfully compete with its competitor and created its own brand value by imposing their cultural activities as well as ethical working environment. Whole food market 2nd standard by maintaining ethical environment of their work places as well as the organisational system.
Rarity
Whole food market has imposed a totally new idea to the market by implementing the green strategies towards the work so far system.
In terms of priority whole food market is not there resourced but their organisational culture in the rear and it is very hard to find a standard of this level in any organisation culture other than whole food market.
Imitability
Ability of whole food markets is not that hard but imitation of their organisational culture is again very tough as they have done it so deeply that from the very beginning company has always work as a green and ethical company. By providing ethical advantages to its customers and implementing the system into the core strategies of the organisation they made it very hard to Limited.
Organisation
Whole foods has organised to create the ethical values .Rather than focusing on profits, company always focuses on the employee employer relationship and the customer employee relationship which makes it one of the best working environment for an employee. Add a base of organisation whole food markets has successfully integrated all of its path into one place by creating a more and legal environment for business.
Whole food market has always been a Pioneer in the industry in maintaining the relationship between the employees as well as in its organisation.
Whole food market has always done its business with a clear vision towards a society. They have always maintain a balance between the cultural as well as social stand of the company. By providing one of the best working environment in the United States of America food market has become an icon of ethical business. Correct decisions and ethical thinking leadership made its working structure, the structure of employee.
Employees are motivated to work towards achieving their goal while being article. Whole food market fracture reducing peoples over all images by sharing most of the part on their original culture. inter employee relationship is always motivated.