[MUSIC] Welcome back to Corporate Strategy. Last week, we talked about one of the key decisions in corporate strategy being which business should you enter. Now, this week we're going to pick up on the discussion and talk about diversification, which is, entering a new business. When you think about diversification, there's really three types of questions that you should be asking yourself. First is, whether you should diversify. That is whether you should even enter a new business. The second is, which business should you enter. There's so many business out there, which business is the right one for you. And lastly, how can you even enter a new business? What are some of the options that you have available that you can choose from? What we are going to do in this week is really thinking about these three questions and we're going to use a structured approach as a series of steps that you can use and then apply in your setting. Now, let's begin our discussion of diversification with some examples. The first example is the Finnish post. Like many national post carriers, their main business is delivering the post to your homes. Now, the Finnish post recently has decided to diversify into a new business, they now offer also to mow your lawn. So they not only deliver your mail, they also can mow the lawn for you. And the reason they can offer that is they do that on quiet days. When the volume of the post is limited, they have spare time and the person delivering your mail can then also mow your lawn. The next example is Moxy, which is a new hotel chain, and do you know who's behind this? Well, you might be surprised to learn, that one of the founders of this hotel chain is Ikea. Of course, we all know Ikea from its furniture, that you need to self-assemble, but they also have a real estate business, they typically rent out office space to companies. But now they've decided, we want to use our real estate business and enter the hotel business. And what's interesting is that they teamed up with Marriott, which is one of the largest hotel operators in the world. The last example is Fosun, a Chinese company. Originally, it started off as an insurance company, but they have since diversified into many, many different businesses. So they now offer also financing for leasing a car, they're into the entertainment business, they're even into the tourism business. They recently bought a company, ROC oil which is an Australian company which took Fosun into the oil business. Now, what's interesting with this example but many other diversification examples that you see is that oftentimes they're quite exotic. The diversification move oftentimes takes a company into very different businesses than they originally were in. These were three examples of diversification. So diversification is entering a new business. Here's a systematic representation of diversification. Let's say your company is active in footballs, so you produce footballs. And then one day you decide to enter a new business, and let's say that business is a footwear business. Before you were not active in footwear. After, you are active in footwear. And that is called diversification, entering a new business. New means here new to you not necessarily new to the world because when you enter the footwear business, it's very likely that there's already producers of footwear present. So diversification and entering a new business, new for you. Thus, diversification is entering a new business. Now, from last week we saw that we could describe a business in terms of the who, what, how. Now, entering a new business thus means, whenever you change the who or the what or the how. The examples I picked here were mostly changes in the what. But diversification also is entering a new business by changing the who or the how. Now, in the next slide, we're going to look at how you can enter a new business. So what are some of the options that you have available to pursue your diversification? [MUSIC]
