Diversification in the Beverage Industry

The primary reason for diversification is to lower overall risk by reducing dependence on one or only a few product or service areas (Campbell, Goold, & Alexander, 1995, p. 79). In undertaking diversification, companies seek to insulate themselves if demand for one of the products or services falls significantly.

Some companies choose to diversify in such a way that they offer a completely unrelated product or service, while other companies work within the same general category. In the beverage industry, Cadbury has followed a strategy of diversifying into related product areas while PepsiCo has a vast array of companies, including fast food companies, which are apparently unrelated (other than serving food products) to the manufacture and distribution of beverages and soft drinks. Other companies, such as ITT, have diversified to the point of being conglomerates, with the

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companies are increasingly joining with others within their own industry (banking) or in similar industries (Disney and Capital Cities), to gain entry to new markets and to realize greater economies; these large transactions also mark a move away from unrelated business strategies among the largest of corporations. Diversification and Performance While diversification can represent a good opportunity for organization whose products are becoming obsolete, companies are increasingly recognizing that diversification for its own sake can bring about unforeseen difficulties which hamper, rather than enhance, a company's performance. Companies which follow an unrelated business strategy, for example, may well find that there are increased costs associated with operating multiple diversified units with little commonality. In order to manage such firms, executives often rely on financial controls on operating performance, but this can focus results on short-term performance and reduce the company's ability to compete effectively in the long-term. This has led analysts to examine the concept of relatedness, which is the degree of commonality and interdependence among the various units of a company. The degree of relatedness appears t
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Some common words found in the essay are:
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Approximate Word count = 2142
Approximate Pages = 9 (250 words per page)

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