Unrelated diversification strategy

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 What is unrelated diversification strategy

 Meaning of Unrelated Diversification. Unrelated diversification involves entering into new businesses
that are not related to the core business of the company. An unrelated diversified company has, under
a single corporate umbrella, more than one business- units which operate their activities in different
industries.
Examples of unrelated diversification strategy

 Soft Drinks and Sport Tournaments

 This is something that Red Bull does. You have two lines of business here: producing and
selling soft drinks on one side, and running sport tournaments and competitions on the
other side (and cashing in from sponsors and TV rights).
 Washing Machines and Jet Engines
 Companies like GE manufacture all kind of things, including washing machines and jet
engines. Even if doing so implies always a manufacturing process, those products are
radically different and totally unrelated. How many washing machines are sold has nothing
to do with how many jet engines you can place to Airbus or Boeing.
Examples of unrelated diversification strategy

 Enterprise Software and Online Gaming

 Microsoft is strong on enterprise software sold to large businesses, and at the same time is
aggressively pursuing the gaming sector with Xbox. This is another great example of
unrelated diversification that leverages core competencies.
 The fact that businesses are booming does not necessarily mean there is an unsuitable thirst
for games, and vice versa. Yet, creating and distributing business software or online
gaming subscriptions are quite similar in nature. To do both, you need server infrastructure
and good software developers.
 Advantages of unrelated diversification
strategy
 Unrelated diversification provides the opportunity to change to industries that are more profitable.

In addition, when the firm's primary business is located in a highly fluctuating

industry, a company can reduce its risk by diversifying into unrelated businesses.
Disadvantage of unrelated diversification

 No shared resources. ...

 Management spread too thin. ...
 Politics between divisions. ...
 Inefficiencies of divisions can be hidden. ...
 Slower decision making.
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