Generally it is possible to classify companies based on the diversification strategy selected. There are companies that diversify within the industry and are called related diversifiers. And there are firms that diversify across industries and are called unrelated or conglomerate diversifiers. Amazon falls into the latter category. This diversification strategy is only one of the many strategies used by Amazon for its developing business, which could be clearly supported byAnsoff’s Matrix.(Mcdonald, M. and Meldrum, M. 2007, p.129)
Amazon diversified from solely a bookstore into selling music, video, downloads, general electronics, apparel, furniture, food, and toys, mobile phones, motor spare parts, medicines, cosmetics and cloths etc.
As in every strategy Amazon’s diversification too has its own merits and demerits. On looking at the pros, Amazon’s diversification would prove to be very good for their business because they would have a diverse customer base. Also this diversification would improve their business’ security as well because if a problem occurs in one of the brands, it would not necessarily impact the whole business. It could also be achancein creating a new identity in a particular consumer market and through excellence make that brand a market leader. This new brand could be tagged with excellence in the particular market and it could achieve a competitive advantage ahead of the competitors.(Lopes, 2011)
The demerits of Amazon’s diversification are plenty when compared to their merits.First of alltheir focus was on effective customer centric approach combined with maintaining low cost. Indoing so when they split up they will lose certain economies gained by centralized branding e.g. They will have to build separate individual web sites for each one of the brands in the specific markets and then it will be hard to minimize the increase in fixed costs for all the maintenance activity of each site and hence therefore...