Diversification Strategies Essay

Diversification is a throw of corporate strategy to increase profitability of a caller-out finished greater gross sales volume obtained from impudent products and parvenue markets. It occurs either at the concern unit level or at the corporate level. It is a risk wariness technique that mixes a wide variety of investments in spite of appearance a portfolio. It attempts to smooth out unmethodical risk events in a group so that the positive performance of some investments will fling off the negative performance of others.Companies may diversify for strategic objectives, expected outcomes, priceless comparison between strategy and expansion. Some companies diversify by check unexampled positions through and through mergers and acquisitions whiles others diversify when there be not such(prenominal) emergence opportunities for the market they are in. There are many reasons for move a variegation strategy, but most pertain to managements desire for the organization to gr ow. Companies must becalm down whether they want to diversify by going into related or unrelated businesses.They must then decide whether they want to expand by developing the new business or by buying an ongoing business. There are advantages to diversification, beyond exactly expanding ones product line. For example, a diversified friendship is potentially better insulated against a loss of revenue in one business tranche. Diversification strategies are partd to expand firms operations by adding markets, products, services, or stages of production to the existing business. The purpose of diversification is to allow the company to envision new lines of business that are different from current operations.When the new game is strategically related to the existing lines of business, it is called concentric diversification. On the other hand, when the new and the archaic businesses are unrelated it is classified as Conglomerate diversification which occurs when there is no rou gh-cut thread of strategic fit or relationship between the new and old lines of business, meaning the new and old businesses are unrelated. Compare and distinguish the ii businessescore business, their size, financials, global presence, use of e-business (marketing, sales, etc. ).Johnson & Johnson Inc. SuccessfulJohnson & Johnson is an American multinational pharmaceutical company founded in 1886, manufacturing sterile surgical supplies. Its core business is the manufacturing of medical devices and consumer packaged goods. Its park stock is a component of the Dow Jones Industrial Average. The company is listed among the Fortune 500. The union has grown to have more than 250 operating companies in 60 countries employing slightly 116,000 people, producing medicines and medical devices, as rise as consumer products like sanitary goods, vitiate shampoo and dental floss. subject field semiconductor unit Corporation Unsuccessful subject semiconductor unit Company has an internat ional reputation for semiconductors. The pioneering chip maker offers a variety of integrated circuits (ICs), especially analog and mixed-signal (blending analog and digital functions) chips. Its products focalise on analog chips, which transform physical information light, sound, pressure, even piano tuner waves into data that a computer can use. National Semis chips are used in wireless, networking, medical, solar, automotive, and industrial applications.It gets more than 75% of sales from customers outside the US, largely to contract manufacturers that serve its OEM customers. In the mid-seventies, the company attempt to make electronic consumer products in addition to the semi-conductors that went inside them. Compare and contrast their outcomes (one successful, one unsuccessful) Johnson & Johnson Johnson & Johnson is a diversified healthcare company that develops, manufactures and markets products in trey primary lines of business Pharmaceuticals (41% of sales), Medical Devices and Diagnostics (35%) and Consumer Products.Since the 1900s, the company has pursued steady diversification. It added consumer products in the 1920s and created a separate division for surgical products in 1941 which became Ethicon Inc. It expanded into pharmaceuticals with the purchase of McNeil Laboratories Inc. , Cilag, and Janssen Pharmaceuticals, and into womens sanitary products and toiletries in the 1970s and 1980s. In recent years, Johnson & Johnson has expanded into such diverse areas as biopharmaceuticals, orthopedic devices, and mesh publishing.Recently, Johnson & Johnson has purchased Pfizers Consumer Healthcare department. The transition from Pfizer to Johnson and Johnson was completed December 18, 2006. National semiconductor Corporation The company wasnt suited for retail manufacturing, and was crushed by companies that were. By the time digital watches became popular in America National had been driven from the marketplace, suffering losses that overshadowe d its success in semiconductors. Analyze the trinity primary reasons for the different outcomes.First, Johnson & Johnson diversified into items that are strategically related to the companys existing lines of business. Johnson & Johnson is a diversified healthcare company that develops, manufactures and markets products in three primary lines of business pharmaceuticals, medical devices and diagnostics and Consumer Products. On the other hand, National Semiconductor Corporation entered into the production of unrelated products which is not common thread of strategic fit or relationship between the new and old lines of business, meaning the new and old businesses are unrelated.Second, Johnson & Johnson diversified through mergers and acquisitions of new companies. For instance, it expanded into pharmaceuticals with the purchase of McNeil Laboratories Inc. , Cilag, and Janssen Pharmaceuticals, and into womens sanitary products and toiletries in the 1970s and 1980s. In recent years, J ohnson & Johnson has expanded into such diverse areas as biopharmaceuticals, orthopedic devices, and Internet publishing. Recently, Johnson & Johnson has purchased Pfizers Consumer Healthcare department.The transition from Pfizer to Johnson and Johnson was completed December 18, 2006. On the other hand, National Semiconductor Corporation entered into diversification to make electronic consumer products in addition to the semi-conductors that went inside them. They did not embark on harvesting strategy through acquisition and mergers. They had stiff opposition and were crushed by companies suited for retail manufacturing. Lastly, Johnson & Johnson diversification strategy is well matched to the strengths of its top management team members which are factored into the success of that strategy.On the other hand, National Semiconductor Company top executives did not manage diversification effectively. Recommend two actions the unsuccessful one could have made to make their diversificati on imagine successful First is that National Semiconductor should ensure a diversification strategy which is well matched to the strengths of its top management team members and factored into the success of that strategy. different diversification strategies require different skills on the part of a companys top managers, and that factors should be taken into consideration before firms are joined.For instance, the success of a merger may not depend solely on how integrated the joining firms become, but also on how well suited top executives are to manage that effort. Secondly National Semiconductor should diversify into related products where they can control the market. To conclude, I must narrate that if diversification strategy is done strategically to relate to the companys existing line of business or diversified through mergers and acquisitions of new companies with the support of its top management team members, then its objective of growth and risk taking can be achieved.