How can related diversification create a competitive advantage for the firm?
XXXXXXX XXX XXXXXXXXXX XX XXXXXXX XXXXXXXXXXXXXXX in XXXX, think XXXX to XXX example XX Delta’s XXXXXXXX XXXXXXXXXXX XXXXXXXX XX acquire an XXX XXXXXXXX—clearly an unrelated XXXXXXXXXXXXXXX move. What challenges might XXXXX encounter XX XXXXXXXXX this XXXXXXXX? XXXXX of the strategic concepts you XXXX XXXXXXX XXX how XXXX can XXXX you evaluate Delta’s decision.
The XXXX diversification XX XXXXXXX XX a XXXXXXXX XX XXX company XX XXXXX into a new market or industry in which the business XX XXX XXXXXXXXX operating. In XXX process XX diversifying, XXX company XXX also XXXXXX a new product for the XXX XXXXXX. XXX XXXX XX diversification is related XXXXXXXXXXXXXXX. XXXXXXX Diversification XXXXXX XXXX XXX company adds or XXXXXXX XXX existing XXXX of production or markets by XXXXXXXXXXXXX a XXX XXXXXXX or penetrating into a new market XXXX XX XXXXXXX XX its XXXXXXXX XXXXXXXX. Under XXXXXXX diversification, XXX company XXXXX it XXXXXX XXX the XXXXXXXXXXX XX XXX products by XXXXXXXXX complementary XXXXX or services.
XXXXXXXXX XXXXXX related XXXXXXXXXXXXXXX XX it XXXXXXXXX the XXXX of loss and also XXXXXXX XXX XXXXXXXXX losses as the investment XXXXXXXXX is diversified XXXX XXXXXXXXX XXX XXXXXXX businesses. This is because XXX owners are XXXXX of XXX XXXXX involved XXX XXX XXXXXXX that XXXX may XXXX XX face. XXXXXXX, XXXXXXXXX XXXXXXXXXXXXXXX does XXX XXXXX XXX expected results XXX XXXXXXX. One such XXXX XX the XXXXXXXXXXXXXXX XX Delta airlines XXXX it XXXXXXXX the oil refinery. The XXXXXXXX XX XXXXX XXXXXXXX in XXXXXXXXX the oil XXXXXXXX initially XXXXXXXX XX XX a profitable one XXX in XXX long run, it XXXXXX out to XX loss-XXXXXX. The XXX of the diversification was XX XXXXXX that the company gets the fuel for XXXXXX XXXX XXX XXX refinery. XXXXXXX, it XXX XXX work out the way it was expected to. The XXXX reason for this XX XXXX delta had no idea XXXXX the risks and XXX XXXXXXX XXXX the XXXXXXX would XXXX XX XXXX in XXX fuels XXXXXX. XXXX was a failure XXXXXX XXXXXXX it was an XXXXXXXXX XXXXXXXXXXXXXXX. The XXXXXXX of XXXXXXX diversification XX XXXXXXX among the XXXXXXXXX XX the risk XXXXXXXX XX XXXX. If Delta airlines XXX XXXXXXXXX on the acquiring XX XXXXX airlines XXXX Northwest airlines then they XXXXX have been able to XXXXX out their business XXXXXXXXXX XXXXXXXX. XXX major challenge that XXXXX would XXXX is regarding XXX operational XXXXXXXXXX XX an XXX refinery. The issue was also XXXX airlines are a XXXXXX XXXXXXXXXXXX business and XXX refinery is another. XXXX are XXXXXX XXXXXXXXX to XXXXXX XXXXXX XXX competition. XXX profits XX XXX company XX XXX XXXXXXXX in such a situation XXX they XXXX XXXXX XXXX XXXXXXXXXXXXXXX. This XX mainly a problem XX corporate XXXXXXXX. Though XXX plan of XXXXX seems XX XX XXXXXXXXXX, XXX XXXX-run XXXXXXXXXXXXXX of XXX XXXX failed XX they XXX no idea about the XXXXXXXXXXX XX the business. This can be XXXXXXXXXX better XXXX th e XXXX of Porter’s value chain analysis. This XXXXX XXXXXX that XXX of the XXXXXXX XXXXXXXXXX that XXX firm has XX perform XX procurement. XXX procurement XXXX airlines XXXX to XX is mostly XX fuel. But XXXX XX XXXX XX a support activity XXXX and XXX XX a primary XXXXXXXX. Delta XXX the XXXXXXX XX XXXXXXXXXXX the XXXXXXXXXXX of XXX refinery XX a part of XXX XXXXXXX XXXXXXXX. XXXX, XXXXX XXXXXX follow XXX XXXXX chain analysis for taking XXX XXXXXXXX.
Keeping XXX XXXXXXXXXX of related XXXXXXXXXXXXXXX in XXXX, XXXXX XXXX XX the example of Delta’s XXXXXXXX XXXXXXXXXXX XXXXXXXX XX XXXXXXX an oil refinery—clearly an XXXXXXXXX XXXXXXXXXXXXXXX move. XXXX XXXXXXXXXX might Delta encounter XX operating this refinery? Think XX the XXXXXXXXX concepts you have learned and how they XXX help you XXXXXXXX Delta’s decision.
XXX XXXX diversification XX XXXXXXX as a XXXXXXXX of the XXXXXXX to XXXXX into a XXX market or industry in XXXXX the business XX not currently operating. In the process XX XXXXXXXXXXXX, XXX XXXXXXX may XXXX create a new product for XXX new market. XXX type XX diversification XX XXXXXXX diversification. Related Diversification XXXXXX when XXX XXXXXXX adds or expands XXX existing line XX production or markets XX XXXXXXXXXXXXX a XXX product or XXXXXXXXXXX into a new XXXXXX XXXXX XX related XX XXX XXXXXXXX activity. Under related XXXXXXXXXXXXXXX, XXX XXXXXXX XXXXX it easier for XXX XXXXXXXXXXX of its products XX producing XXXXXXXXXXXXX XXXXX or services.
XXXXXXXXX prefer related XXXXXXXXXXXXXXX XX it XXXXXXXXX the XXXX of XXXX and also XXXXXXX the potential XXXXXX as XXX investment XXXXXXXXX XX diversified XXXX XXXXXXXXX but related businesses. XXXX is because XXX owners XXX XXXXX XX the risks XXXXXXXX XXX the threats that they XXX XXXX to XXXX. . However, XXXXXXXXX diversification XXXX XXX XXXXX XXX XXXXXXXX XXXXXXX XXX XXXXXXX. XXX such case is the diversification XX Delta XXXXXXXX XXXX it XXXXXXXX XXX XXX XXXXXXXX. XXX decision of XXXXX XXXXXXXX in XXXXXXXXX the XXX refinery XXXXXXXXX appeared XX XX a XXXXXXXXXX XXX but in XXX long run it XXXXXX out to XX XXXX-making. The XXX XX XXX diversification XXX to XXXXXX that XXX company gets the XXXX for flying from XXX oil XXXXXXXX. However, it XXX XXX work out XXX way it XXX XXXXXXXX XX. XXX main XXXXXX XXX this XX that XXXXX had no idea XXXXX XXX risks and XXX XXXXXXX XXXX the XXXXXXX would XXXX to XXXX in the fuels XXXXXX. This was a XXXXXXX XXXXXX because it XXX an unrelated XXXXXXXXXXXXXXX. XXX concept XX related diversification is XXXXXXX among XXX companies XX the XXXX involved XX less. XX Delta airlines XXX continued XX XXX acquiring of XXXXX airlines XXXX XXXXXXXXX airlines XXXX they would XXXX XXXX able to carry out XXXXX XXXXXXXX XXXXXXXXXX XXXXXXXX. XXX major challenge XXXX XXXXX would XXXX XXX regarding the XXXXXXXXXXX activities XX an oil refinery. XXX issue XXX also that XXXXXXXX XXX a highly XXXXXXXXXXXX business and XXX refinery XX XXXXXXX. XXXX are XXXXXX XXXXXXXXX to XXXXXX XXXXXX XXX XXXXXXXXXXX. XXX XXXXXXX of XXX company do XXX XXXXXXXX in such a situation XXX XXXX lose money XXXX XXX diversification. This is XXXXXX a problem XX corporate XXXXXXXX. Though XXX plan XX Delta seems XX XX beneficial, the long-XXX XXXXXXXXXXXXXX XX XXX plan XXXXXX as XXXX had XX XXXX about the uncertainty of the XXXXXXXX. This XXX be understood XXXXXX with the XXXX of Porter’s value chain XXXXXXXX. This XXXXX XXXXXX that XXX XX XXX XXXXXXX activities that XXX firm XXX to perform XX XXXXXXXXXXX. The XXXXXXXXXXX that airlines XXXX XX XX is mostly of fuel. But XXXX XX good XX a support XXXXXXXX XXXX XXX not as a XXXXXXX XXXXXXXX. Delta did the mistake XX considering the acquisition XX XXX XXXXXXXX as a XXXX XX XXX primary activity. Thus, XXXXX should XXXXXX XXX XXXXX XXXXX XXXXXXXX for XXXXXX any decision.