Compare and contrast the diversification of two case firms : Macdonald and Johns

Question

Compare and contrast the diversification of two case firms :Macdonald and Johnson & Johnson. Identify the different industries in which each firm operates and discuss whether each firm is highly diversified. If the firm is highly diversified, discuss whether the firm pursues related or unrelated diversification strategy. If the firm is not highly diversified, propose a new diversification strategy for the firm by identifying the industries the firm should enter and discussing whether it should pursue a related or unrelated diversification strategy.

Explanation / Answer

Diversification of Mcdonald and Johnson & Johnson:

Industries in which the firm operates:

Mcdonald: Restaurants(mainly fast food restaurants)

Johnson & Johnson: Health care industry,pharmateutical industry,cosmetics industry (baby and beauty products)

Diversification :

Mcdonalds is highly diversified with their variety of food items like burgers,coffee,sandwiches,cool drinks etcThey have diversified market share globally and they make their presence in about 36,900 locations.So their products variety and markets globally are highly diversified.They have diversified their products from fast food to Mccafe providing coffees .But they are diversified in the related industry and not into any other industry.

Whereas Johnson & Johnson are also highly diversified with their baby products,beauty products,medical devicesetc.They have also diversified market share globally.They have diversified their products variety in each sector like in baby products they produce shampoo,baby creams,oils etc.In beauty products they provide face wash,face cream,soaps etc.So their product diversification in each sector is numerous.And they Have also diversified into other unrelated industries like health care by providing medical devices for surgery and also into pharmateutical industry by providing drugs .Baby products and drugs are unrelated products produced by the same firm.So compare to Mcdonalds ,Johnson & Johnson have made their diversification strategy in related as well as unrelated industries

For Johnson & Johnson ,they are already highly diversified in related and unrelated industires so they need not follow a new diversification strategy instead they can concentrate on the existing products and make the firm number one

But for Mcdonalds ,as they are into only one industry,ie food industry they can follow a new diversification strategy to extend their market.As we all know Mcdonals is famous for fast food items so their new diversification strategy should also be related to the food industry so that they can reach the customers easily rather than going for unrelated industry.They can plunge into catering industry by having tieups with big restaurants and they can also provide catering services for functions,or office canteen etc.They can also diversify their products from fast food items to dishes like other restaurants so that they can attract all kind of customers rather than only fast food lovers.They target audience can be increased from fast food lovers to all kind of custmoers .So this related diversification strategy can be followed by Mcdonald to establish them as a number one in food industry rather than only fast food restaurant.

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