Analysis of Diversification Strategies in Business Development

This report delves into the concept of diversification as a crucial risk management strategy in business and investment. It explores how diversifying a portfolio across various assets and investment vehicles can mitigate risks by offsetting the negative performance of some investments with the positive performance of others. The report highlights the benefits of diversification, particularly the independence of security performances. It examines different types of diversification, including managerial, market-related, and operations-related, providing a real-world example of Best Buy's diversification strategies, such as expanding store services, adding specialized departments (Samsung, Apple, wireless services), and providing in-home repair services. The report also references key academic sources to support its analysis and provide a comprehensive understanding of the subject.

Running Head: DIVERSIFICATION 0
DIVERSIFICATION
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2/7/2020

DIVERSIFICATION 1
Diversification is a kind of risk management strategy which involves a very wide variety of
investment in their portfolio. A diversified portfolio includes investments in the portfolio. A
diverse portfolio contains various assets and investment vehicles. The main reason behind
this technique is the portfolio that is constructed in various different kinds of assets (Gomez‐
Mejia, Makri, & Kintana, 2010).
Diversification moves towards a smooth and un- organized events of risk, in a portfolio, so
the positive performance of some investment neutralize the negative performance of the
other, the benefits of diversification includes the security in the portfolio are not perfectly
interlinked and that is that they respond in a different manner and mostly in opposing ways
of the market (Acemoglu, Griffith, Aghion, & Zilibotti, 2010).
The three types of opportunity sharing sound basis of diversification or vertical integration
are the management, market related and operations related. One of the examples of this is the
managerial opportunities in the company Best Buy. The company Best Buy focused on
adding several store under stores over the last few years, the green squad segment does in the
store and in home repairs and service on the products that they offer, filling a want or a need
that various customer will have for the service after the sale. Apart from this they have also
added Samsung and apple areas in their stores and along with that there are various wireless
departments that can sell phones and plan to the consumers (Gomez‐Mejia, Makri, &
Kintana, 2010).

DIVERSIFICATION 2
REFERENCES
Acemoglu, D., Griffith, R., Aghion, P., & Zilibotti, F. (2010). Vertical integration and
technology: theory and evidence. Journal of the european economic Association, 8(5), 989-
1033.
Gomez‐Mejia, L. R., Makri, M., & Kintana, M. L. (2010). Diversification decisions in
family‐controlled firms. Journal of management studies, 47(2), 223-252.