DIVERSIFICATION AND KODAK

Diversification and Kodak

Diversification and Kodak

Introduction

This paper intends to explore about the significance of diversification. It has been observed that companies which diversify are always running away from something. The companies are basically trying to run away from their core business activities. Diversification basically refers to extending the current business activities of any company. Diversification may be completely related to the current business or it might be entirely unrelated to the current business activities. However, whatever form it may take diversification has its own pros and cons. The purpose of this paper is to explore the negatives of diversification. Companies trying to diversify usually do not realize that getting engaged in diversification makes them away from their core business.

Moreover, a case study from the viewpoint of diversification will be elaborated. The company I have chosen to discuss is Kodak. Kodak was incorporated in 1901 (www.kodak.com). Kodak enjoyed a lot of fame and success in the field of imaging. Later on, increased competition made the situations worse for Kodak’s survival. Kodak decided to diversify its business operations in various related and unrelated businesses. However, the diversification strategy did not work for Kodak. The negative outcomes of Kodak’s diversification strategy will be discussed in the paper.

Any company which has several businesses, may be related or unrelated is said to be diversified company. Diversification is a concept that comes in when companies have to decide regarding their business portfolios. In today’s modern and competitive business environment, every company is concerned about its growth and development. Today’s businesses create several challenges for the managers. One of the most important challenges is to select the right portfolio for businesses in order to sustain the growth. Moreover, strategic planning has become extremely important to undertake the challenges of the business world (Graham, 2009 Pp. 75-90).

One of the strategic options available to today’s business managers is to ‘diversify’ in order to make their business grow. Diversification on one hand help companies to invest in different sectors or industries also making the risk diversified across sectors. This risk diversification help companies survive when any one of the industry sectors suffers. However, operating in different industries require such business leaders who are able to completely understand the core differences prevailing within industries. Here comes the main problem of diversification. Business leaders or managers usually assume that the way they have been running one business, the other diversified business can also be run in the same manner. This approach is wrong and creates difficulties for the companies to survive in the long run (Roy, 1956 Pp.1-25).

Business environment of every industry differs. This is the reason that managers are not able to cope up with the different requirements of different businesses. The companies which gets involved in the process of diversification usually looks only on the positive sides of this strategic option. However, there are some prominent disadvantages related to the option of diversification. One of the biggest disadvantages of diversification is that companies do not even realize that.