Business 3 Written Assignment:Diversification strategy

Diversification strategy

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Diversification is one of the strategies that the company will use so as to stay afloat in the highly competitive market. It is a risk management technique which involves mixing a wide range of investments in the same portfolio (Kenny, 2009). Most companies use the strategy so as to grow, spread risk, to fully utilize the existing resources and to escape from the undesirable industry environment. The essence of using the strategy is that on average, the different product types will yield higher returns to the company and at the same time reduce risks in comparison to individual products. Since the company market is a highly competitive one, the organization should diversify its products and services so as to attract more customers and reap as much benefits as it can from the potential market.

Diversification of the business

The advantages associated with the diversification strategy are: It creates opportunities to achieve economies of scale. It creates opportunities to expand product offerings and expand into new geographical areas. It reduces the cyclical fluctuations in sales and revenues and cash flows and it lets the company continue to grow after the core business has matured. The disadvantage is that it may be complex and difficult to coordinate the different but related businesses. The other problem with the strategy is that the managers of the firm may lack the knowledge of the firms’ businesses. The strategy may therefore be useful if well implemented and follow ups carried out so as to ensure that the strategy is effective and advantageous to the firm.

Strategy for diversification indicating the products and industries for the diversification and how synergies may be gained from the diversified activities

Diversification could either be related or unrelated to the products currently on offer. In the case of the APAtizer Company, since not all tutors require the assignments to be written in the APA format, tutorials for the other formatting styles such as Turabian, Chicago, MLA and Harvard could also be offered at the APAtizer website. That will highly increase the sales volumes due to the increase in the market size. That will be as a result of different services offered. The site could also use other retailers to offer their services. That could be through affiliate companies which would increase the company’s market.

Synergies may be gained from the diversified activities in the human resource department since there will be no need to acquire new staff as long as the diversified strategy is related. The technology will also not be acquired as the existing one will be shared in the processing of the new products and services. The few resources will be used to produce the new products and increase revenue. By using the unrelated product differentiation strategy, the synergies to be gained will be in terms of reduced risks of the overall investments as compared to the individual investment.

Identification of the foreign markets that the company should enter and the strategy that it should use to enter the market

The company should enter the international market since there are University students all over the world who need the kind of services offered by APAtizer. Before entering the market, assessment of the market should be done. It could be done by researching on issues such as the regulations associated with the business (Tallman, 2007). The kind of requirements of running the business in the new market should be known. The costs of the licenses and the application processes should not be ignored. There should also be competitive assessment to know the size of the market, the market trends and other situations that might affect competition.

The other kind of assessment will be the distribution channel assessment. That will be done so as to know the overall strategy of the potential channel partner, their channel coverage, the product category that they offer and their core strengths and weaknesses. The organization should then carry out internal assessment to know its current position and whether it can enter the market. It should know the critical success factors of entering the market and the organizational changes that would be necessary.

The challenges that the company may face in the foreign market and how it might respond strategically to minimize the impact of these challenges

There are certain challenges that the company may face in the foreign market. The political environment of the country of operation affects the company’s operation. If the environment is not stable or it is characterized by strict regulations, the company may have difficulties in operation. That would most likely lead to the company reducing its sales and revenues. To minimize the impact of such a challenge, the company ought to do research on the extent of government control and know what is less likely to lead to law suits.

The new foreign market entrant may also be faced with the challenge of identifying a true market need. Identifying the market needs of clients in such a big market may not be easy. It may also be difficult due to the fact that one has not grown in the foreign cultural background therefore the people’s needs may not be that which one is used familiar with. The internet technology and applications such as Google analytics may effectively assist to match the needs of the numerous clientele bases rather cheaply.

The other challenge faced may be the societal beliefs of the new foreign markets. Some cultural values and beliefs of the people in the country in which the company is hosted may be difficult to get along with. To minimize the effects of such difficulties, the should may ensure that it understands the peoples believe and train its staff on the importance of respecting peoples believes (Luo, 1999).

Language may also be a challenge of the company entering into a foreign market. The main language used for communication by the host country dwellers may hinder the execution of a company’s operations. The operational staff should therefore be individuals who understand the language and for the strategic managers, they should be taught the basics of the language and they should also have translators to assist them.

Scenario when it would not make sense for the company to diversify or expand into a foreign market and Support for the rationale

Case scenario: A company, on expanding into the foreign market, incurs high operational expenses and low returns on investments. The company incurs a high cost of managing the complex infrastructure. The cost has outweighed the benefits of increased scale. If anything it operates at a loss since the expansion into the market. Before it undertook the expansion into the foreign market, the company incurred low costs of managing its infrastructure and generally made profits. Since it is the objective of any company to maximize profits and increase the shareholders wealth, there would be no need of the company to enter the foreign market.

Assessment of how the company will create a business environment conducive to ethical behavior

The company’s management and the supervisors will be instrumental in creating a business environment conducive to ethical behavior. The values and attitude of the leaders determine the staffs’ behavior. The management and the company’s leaders will therefore lead by example and will exhibit the appropriate ethical behavior. The staff will take the leaders actions as the guiding force to make right choices when faced with ethical dilemmas (Donaldson & O'Toole, 2007).

Since the firm is an operates on the internet technology, it is also a means by which malpractice can thrive. The company will be protected from the risks of dishonest IT experts who may manipulate the systems. Adequate security measures will be put in place so as to ensure high level of integrity standards among the staff.

The management will ensure that they abide by the laws and regulations of doing business. They will also abide by the PBO and the specific codes that are laid down by the relevant regulators and professional bodies. The management will generally put integrity into practice by setting up a code of conduct, strengthen the system of controls and Foster ethical culture within the company. By setting up a code of conduct, the management will have prevented corruption and fraud. The codes should be enforceable, practical and up to date according to the principle of fair competition.

Strong system controls will allow for the business to be conducted in an orderly manner. It will help in the detections of irregularities thus allowing the management to carry out corrective measures at an early age. The corruption loopholes will thus be sealed early in advance. With the adoption of ethical culture, the organization will enhance its profitability and operational efficiency. Equipping the staff with the knowledge on the legal requirements through training will give them the skills of handling ethical dilemmas.

References

Donaldson, B., & O'Toole, T. (2007). Strategic market relationships: From strategy to implementation. Hoboken, NJ: Wiley.

Kenny, G. (2009). Diversification strategy: How to grow a business by diversifying successfully. London: Kogan Page.

Luo, Y. (1999). Entry and cooperative strategies in international business expansion: [...]. Westport, Conn. [u.a.: Quorum.

Tallman, S. B. (2007). A new generation in international strategic management. Cheltenham, UK: Edward Elgar.