What are the alternative for a organization if it wants to change its purpose? can it be done? What if SONY wants to move into the fast food business?How can this be achieved?

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litteacher8's profile pic

litteacher8 | High School Teacher | (Level 3) Distinguished Educator

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One of the causes of the financial crisis was companies getting into new industries that looked lucrative, but for which they had no expertise.  For example, it seemed that every and any company became a bank in the last decade.  Finance looked like a very winning prospect, and there were many opportunities to make huge profits.  Unfortunately, this money that they were making hand over first was an illusion.  The result of companies trying new things was often disaster.

 

justaguide's profile pic

justaguide | College Teacher | (Level 2) Distinguished Educator

Posted on

Your question relates to diversification in the businesses that are managed by organizations. Many organizations have been able to do this very successfully. A couple of examples would be tobacco majors Phillip Morris and the Indian Tobacco Company, which have diversified into the food business and now almost half of their revenue is generated from their non-tobacco businesses.

I agree with the earlier editor that diversification in most cases has to be done in a gradual manner. But circumstances sometimes force organizations into diversifying in a very fast manner and into areas where they have no prior experience.

The examples of the cigarette manufacturers that I gave earlier had to move out of their core business as health concerns related to the use of tobacco was going to rapidly decrease the revenue they earned from the sale of tobacco based products.

The new business into which an organization diversifies has to be chosen carefully after a lot of analysis. Sony on its own would not be successful in the fast food business as there are hundreds of competitors already in the field.

It cannot open its own outlets and expect people to switch from Big-Macs to Big-Sonys instantly. The best alternative for Sony would be to buy a fast food company that is already in business and doing quite well. It should be possible to acquire the company at a reasonable price and there should be scope for improving revenue with better management and introduction of new products. Sony could start a complete range of healthy fast food in the company it has acquired and push it aggressively. They would have to differentiate themselves quickly from the pre-existing players in the field and attract new customers.

Diversification into totally unrelated businesses is not an easy task and organizations do not get into it unless it is absolutely necessary.

pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

If an organization wants to change its purpose, it ought to do it gradually.  It would be too difficult for a company like Sony to change so radically (to a completely new business) in a short period of time.

A company like Sony has all of its expertise in its electronics business and its corporate culture is centered around that industry.  That is what the company knows.  For Sony to move into fast food would have very few benefits.  It's not like people would automatically think "Sony -- that's going to be good food."  That means they wouldn't have any automatic goodwill that would translate to market share.

In addition, their corporate hierarchy would not know anything about the fast food industry.  They could import new people, but they surely could not completely change their whole corporation very quickly.

If a company like this feels that they must change, they ought to go about it gradually.  They would need to perhaps start by getting into something retail oriented (like selling their own products in their own stores) so they could build up expertise in an area that is at least vaguely related to fast food.

Overall, I just don't see this working though -- it's too big of a leap (the industries are too different) to make it likely that the transition could be done effectively.

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