Diversification Strategy Essay

Diversification Strategies Diversification is a risk that companies have to take in order to stay competitive in it’s changing market. Some companies have been successful diversifying their business, and in opposition there are other companies that in the process of expanding their business have not succeeded. For the purpose of this report, I will use the “Sara Lee Corporation” as a successful company throughout its diversification strategies. On the other hand, I would use Ebay as an example of a company that did not succeed in a diversification attempt Seep acquisition).

Sara Lee In 1935 Charles Lubing and his brother-in-law started up a string of bakeries called “Community Bake Shop”, years later the company’s name was changed to “The Kitchen of Sara Lee” which was named after Lubing 8 year old daughter. In 1956 Nathan Cummings the owner of Consolidated Foods bought the company and changed its name to “Sara Lee Corporation”. This company has been very successful, and today Sara Lee owns several brands in the food and beverage industry as, well as products in home and body care.

Diversification has lead Sara Lee’s business for many years and it has helped the company to expand, in terms of international marketing. Sara Lee sells products in 180 countries worldwide and also operates in 58 countries. Its business strategies are based on trying to diversify the company investing in the same line of business or products that are close related. Throughout this strategy Sara Lee can streamline its operations, reduce cost operation, and managers can have better access to the company’s operations.

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The strong brand portfolio is another reason that has helped Sara Lee’s business succeed, its business includes Fresh Bakery, North American Retail, Food Service, International Beverage, and International Bakery. Sara Lee in it’s effort to reaming competitive and providing excellent quality food and services to it’s costumers, have been implementing a divestment strategy selling most of the non-core business in which markets Sara Lee had significant impact but was a non-dominant player. This strategy is leading to dividing the company in two Pure Play companies.

Sara Lee’s North American Retail and North American Food Service businesses, which goal would be to concentrate its resources in one line of business to keep delivering long-term values to shareholders. Ebay (Seep acquisition) site in which people can sell and buy a variety of goods worldwide. Ebay throughout the years has built an online costumer-to-costumer business, buyers and sellers can closely interact throughout a bid action were the sellers are authorized to list products for sale and this gives buyers an opportunity to browse throughout the teems listed and then place their bids.

After, a few days when the auction is closed the buyers and sellers arrange the payment and the items delivered to the costumers. EBay was always looking to provide an excellent costumer experience to its users and making sure the interaction between sellers and buyers were successful. Although, eBay’s tried to diversify its business investing in a telecommunication internet service to provide a closer interaction between buyers and sellers. So, in 2005 Ebay announced the acquisition of Skye an (internet phone company), investing in 2. Lion dollars. The ambitious plan was to merge Papal, Seep and eBay into a shopping friendly platform with fast payment and free chat between buyers and sellers. Key’s purchases were not a good investment, it suppose to generate profits and improve the interaction between sellers and buyers, but it did not happened, by 2007 the company was not being successful making money as it has had growing. The users did not get charged for calling others Seep users, Just a very small charge to land line members and cell phones.

Although, the POI idea to improve the experience between sellers and buyers throughout the free chat did not workout either, due that users were not willing to use the chat space, instead they prefer the online auction that did not require contact between them. The company accepted that Seep diversification strategy failed and by 2009 eBay sold it’s 65% of Seep ownership for 2. 75 million dollars to a private firm Silver Lake Partner. The company now is trying to focus on its most successful acquisition There are some reasons that lead eBay to fail the Seep diversification attempt. . The CEO of the company, back in 2005 was Ms. Megan Whitman, she did not do enough diligence in terms of how Seep acquisition would generate revenues to eBay businesses, instead of looking at the number of users that Seep would bring to the company. 2. The eBay core business is commerce; its business portfolio had nothing to do with communication tools. Seep and eBay as a diversification strategy did not fit. 3. Last but not least, eBay’s costumers are not into chatting with the buyers during or at the end of the transactions, there really is no need for that.

As a buyer, if I want to u something from eBay, I Just look for the item that I want and I pay for it, there is no need in my opinion to talk with the sellers about anything. Some of my diversification strategies are: 1. The Chairmen Executive of the Organization (CEO), need to do his/her Job, in terms of deep search about any business diversification, profitability, benefits, costumers needs, and demographic area. If they do that with diligence, the chance for successful business increases. 2.

Another suggestion would be, tried to focuses and dominate the market in what the company does better, eBay s good in commerce, staying in the same line of business, updating their services according to the costumers need in order to stay competitive. Diversification strategies are normally used for companies or firms to expand their operations by adding market, product or services to the existing business. This provide the opportunity of enter in a line of business that is different from their current operations. However, this does not guaranty that success of the company.


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