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There are 2 types of diversification: related and unrelated. Related diversification is where the company enters an associated market/ industry while unrelated diversification enters a market/industry with minimal to no experience at all. Relating these strategies to Blockbuster Inc, current portfolio, it loud seem that H. W. Huskiness’s focus is on Diversification. As diversification is the option which entails the greatest risk (and potentially the greatest reward), alternatives must be presented to ensure that:
- risk would be minimized;
- sustainability/growth must be achieved.
Improve market penetration by concentrating resources on Video Rentals only
Financially, a low-risk option where the company will continue to earn or potentially increase their revenue by obtaining video rental customers from their competitors without having to spend on acquiring ewe and unsure businesses. Sell previously acquired business units (e. Music retailer, TV and film shares, etc) and reinvest capital on promotions and rebinding as necessary. Company could further specialize in current product marketing and development. The concept of putting your eggs in one basket is somewhat of a risk in itself as the company would be fully reliant on the video rental market alone.
Improve market penetration and venture on market development
This option has the benefits of Option A above without the risk of fully investing company resources n the local video rental market alone.
As the local market is relatively saturated, new markets may be obtained internationally. The relative risk is that investing in stores internationally will require capital and that the international markets may not be as responsive as local ones.
Maintain/improve current performance of Video Rental sub-unit and Continue Diversification
Relatively risky option where current resources will be used not only to explore new products but explore new market s as well. This option however, when executed properly can ensure the company’s true not only as a video rental giant but as an entertainment company. Done in the wrong way however can lead to disastrous results and the company’s downfall eventually. Current capital made through the “cash cow” of video rentals can be used to subsidize the newly purchased businesses in terms of capital investment, research and the like to improve the company’s position in the market for such. If met with a certain level of success, the company can also explore market/product development for not only video rentals but for their new products as well.
Maintain/improve current performance of Video Rental sub-unit and Continue Diversification
Though risky and work/capital intensive at the start, having the foresight of venturing into other forms related business as well would be most logical.
However, through careful planning and prudent investing of current resources for future endeavors (in this case packaging the company as an upcoming changes in market structure and customer demand. Film and TV shares can be considered as backward integration which could strengthen their hold on the home entertainment” market while putting up entertainment centers can be seen as moving out of the same niche which they have thrived in for the past years. All this, while keeping their thriving home entertainment business segment intact. The key here in essence is to milk the cow for whatever it’s got, invest profits to penetrate new markets, engage in new segments and continuously redesign the company to meet the ever changing needs of the entertainment scene.
Should this option fail if the related investments falter, the company should still be able to function at the present tit its strong market presence. Given however that the industry has been classified as a slow growing one, opportunities to gain more market share and/or segments should never be overlooked. Researching and adapting to new forms media for home entertainment should be focus of Blockbuster Inc (I. E. Product development) if they want to retain their claim as one of the biggest home entertainment companies.
References
- Anions Growth Strategy Matrix, Business Strategy http://www. Acanthus. Com/databanks/ strategy/business_strategy. PH? Asps (Accessed on July 1 2, 2013)
