Bezos

Economic Reasons Involved in Diversification

There are quite a few economic causes which aid determine what sort of diversification is right to your company, and even regardless of whether a company ought to diversify. Businesses which are undergoing a high degree of success are much less almost certainly to think about diversification than people corporations which are struggling and which might be experience a decline in their marketplace share. These corporations are probably to consider additional opportunities through diversification (Bruton, Oviatt & White, 1994, p. 975).

Mergers and acquisitions are a time-proven technique for corporations to gain access to markets, to improve their provide industry share, and to implement economies of scale. For some companies, mergers and acquisitions provide diversification of risk as the corporations are in a position to enter markets in which they did not previously compete and where the risks are a variety of within the company's main (core) firm segments. In this way, larger corporations can withstand shocks to one firm segment which may well pose significant difficulties to smaller competitors.

Cadbury Schweppes produces the Schweppes and Canada Dry lines of carbonated and fruit-flavored beverages along with A & W Brands of carbonated products, Sunkist products, Crush products, Hires Root Beer and Mott's apple juice and apple sauce. In March 1995, CADBY acquired the remaining shares in the American company Dr. Pepper/Seven Up for $1.7 billion (the company had a 25 percent stake in Dr. Pepper previous to the acquisition). This boosts Cadbury's American soft drink market share to approximately 17 percent (Levy, 1996, p. 3388E).

 

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