Strategic Analysis of Tune Group's Portfolio Diversification

Tune Group has strategically diversified its portfolio across various sectors such as airlines, hospitality, entertainment, and more to achieve global competitiveness and mitigate risks. The driving factors include gaining a foothold in highly competitive industries dominated by multinational gi...Read More

Running head: THE PORTFOLIO DIVERSITY OF TUNE GROUP
The Portfolio Diversity of Tune Group
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THE PORTFOLIO DIVERSITY OF TUNE GROUP
Answer 1:
The following are the driving factors, which drive the diversification of Tune Group:
Global competitiveness:
The business objective of the Tune Group is to gain competitive advantage in several
profitable markets. The group is present in diverse industry like hotel, airline and
entertainment. It must also be noted that these industries are highly competitive and are
dominated by multinational companies like American Airlines, the Hilton Worldwide and
Fox Star Studios. This analysis shows that the aim of Tune Group is to cater to a diverse
range of customers to gain competitiveness in multiple industries.
Diversification of risks:
Tune Group is present internationally in multiple sectors like airlines, cab services,
hospitality management and entertainment. These industries are highly competitive and the
company has to invest huge amount of capital to operate in them. The economic changes in
the global markets like changes in the exchange rates of currencies and emergence of
powerful rival companies often pose threats to profitability and return on investments of
companies1. These business risks necessitate the companies to diversify their product lines
and markets of operations so that they can distribute the loss they incur in one market over
profits earned from other markets. Investments in several markets like airlines and
entertainment guarantees more returns and cap their investments against market risks2. This
1 Shin, H.S., 2014. The second phase of global liquidity and its impact on emerging economies. In Volatile
Capital Flows in Korea (pp. 247-257). Palgrave Macmillan US.
2 Corsi, F., Marmi, S. and Lillo, F., 2016. When micro prudence increases macro risk: The destabilizing effects
of financial innovation, leverage, and diversification. Operations Research, 64(5), pp.1073-1088.

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THE PORTFOLIO DIVERSITY OF TUNE GROUP
analysis shows that the risks, which are present in the market, drive Tune Group to diversify
its products and markets.
Answer 2:
The product portfolio of Tune Group consists of nine products. Tune Talk Sdn Bhd
is the mobile prepaid product of the Tune Group while Tune Hotels Group is the
hospitality vertical of the company. Air Asia Berhad is the airlines product of Tune Group
and the leading low cost airline carrier in Asia. Tune Protect Group Berhad is the insurance
vertical while Tune Studios Sdn Bhd is the music studio vertical of the business
conglomerate. Tune Group owns Queen’s Park Rangers FC, which is a football club in
London. The business group owns Epsom College in Malaysia while Caterham Group is
the automobile manufacturing subsidiary of Tune Group with its headquarters in Britain.
Tune Labs Sdn Bhd finances entrepreneurial ventures in travel, financing and retail
industries3.
These strategic business units contribute towards diversification of the product
portfolio of Tune Group. For example, Air Asia Berhad and Tune Talk Sdn Bhd allow
Tune Group to operate in low cost airfreight carrier and telecommunication markets
respectively. As a result they enable the company to generate revenue from these diverse
markets and distribute its risks4.
3 Tunegroup.com. 2017. About Us. [online] Available at: http://www.tunegroup.com/about.html [Accessed 20
Nov. 2017].
4 Clarke, R., Silva, H.D. and Thorley, S., 2013. Risk parity, maximum diversification, and minimum variance:
An analytic perspective. The Journal of Portfolio Management, 39(3), pp.39-53.

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THE PORTFOLIO DIVERSITY OF TUNE GROUP
The dominant logic supporting this diversification is that the company aims to serve a
global consumer base with its diverse products. The group also aims to provide more
innovative products to maximise the customer benefits.
Answer 3:
Tune Group adds value to its important subsidiaries like Air Asia Berhad and Epsom
College by bringing about continuous innovation. The business conglomerate invests huge
capital to conducts research and development to bring about more innovative and high quality
variants of existing products and introduce new products of its SBUs. These improved and
new products enable SBUs to cater to the new needs of the customers, which earn them high
revenue. This ability to cater to the needs of the customers earns the SBUs high market
position, which leads to the revenue maximisation and expansion into new countries. For
example, Air Asia Berhad is a leading low cost airlines company operating in 25 countries
and earns revenue of over $ 354 million. This shows that the central business objective of the
Tune Group to offer innovative products to maximise customer satisfaction enables the SBUs
to hold high positions in the market and augment their revenue generation, thus adding to
their market value5.
Answer 4:
Tune Group has a huge potential to strengthen its market presence and enhance its
revenue generation in the future. The business conglomerate should expand into new
profitable industries like retail, consumer goods manufacturing and energy sector. This will
allow it to cater to a more diverse consumer base and earn higher profits. This would also
5 Malik, M., 2015. Value-enhancing capabilities of CSR: A brief review of contemporary literature. Journal of
Business Ethics, 127(2), pp.419-438.

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THE PORTFOLIO DIVERSITY OF TUNE GROUP
allow the business conglomerate achieve self-sufficiency. For example, by entering into the
energy sector, the company can provide fuel to its automobile manufacturing subsidiary,
Caterham Group. This would as a result enable the company to reduce the expenditure of
obtaining fuel from third party companies and would make the business group more self-
reliant6.
Tune Group should protect all its profitable subsidiaries expect Tune Labs to grow in
the market. The conglomerate should invest in these profitable subsidiaries because they
generate huge revenue from the market and help it to diversify market risks. Tune Group can
use various tools like market penetration and acquisition and mergers to expand these
subsidiaries into new markets7.
Tune Group should divest in the Tune Labs because the company deals with venture
capital financing. This vertical earns revenue from new entrepreneurial ventures, which do
not earn high revenues. This limits the revenue generation of the Tune Labs. Moreover, the
vertical faces stiff challenges from financial institutions like banks, which have dedicated
venture capital financing departments. Thus, instead of gaining a commanding position in the
venture capital market, Tune Labs loses the competition to the banks. This result in lower
returns on the huge capital the company invests on the new ventures. The conglomerate
instead of maintaining Tune Labs to finance new businesses should incorporate it as a part of
6 Nishino, N., Takenaka, T., Koshiba, H. and Kodama, K., 2014. Customer preference based optimization in
selecting product/service variety. CIRP Annals-Manufacturing Technology, 63(1), pp.421-424.
7 Durand, R. and Vergne, J.P., 2015. Asset divestment as a response to media attacks in stigmatized
industries. Strategic Management Journal, 36(8), pp.1205-1223.

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THE PORTFOLIO DIVERSITY OF TUNE GROUP
its corporate social responsibilities. This divestment would help Tune Group to invest in new
profitable sectors like energy, which would promote its self sufficiency8.
8 Ritchie, J. and Dowlatabadi, H., 2014. Understanding the shadow impacts of investment and divestment
decisions: Adapting economic input–output models to calculate biophysical factors of financial
returns. Ecological economics, 106, pp.132-140.

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THE PORTFOLIO DIVERSITY OF TUNE GROUP
References:
Clarke, R., Silva, H.D. and Thorley, S., 2013. Risk parity, maximum diversification, and
minimum variance: An analytic perspective. The Journal of Portfolio Management, 39(3),
pp.39-53.
Corsi, F., Marmi, S. and Lillo, F., 2016. When micro prudence increases macro risk: The
destabilizing effects of financial innovation, leverage, and diversification. Operations
Research, 64(5), pp.1073-1088.
Durand, R. and Vergne, J.P., 2015. Asset divestment as a response to media attacks in
stigmatized industries. Strategic Management Journal, 36(8), pp.1205-1223.
Malik, M., 2015. Value-enhancing capabilities of CSR: A brief review of contemporary
literature. Journal of Business Ethics, 127(2), pp.419-438.
Nishino, N., Takenaka, T., Koshiba, H. and Kodama, K., 2014. Customer preference based
optimization in selecting product/service variety. CIRP Annals-Manufacturing
Technology, 63(1), pp.421-424.
Ritchie, J. and Dowlatabadi, H., 2014. Understanding the shadow impacts of investment and
divestment decisions: Adapting economic input–output models to calculate biophysical
factors of financial returns. Ecological economics, 106, pp.132-140.
Shin, H.S., 2014. The second phase of global liquidity and its impact on emerging economies.
In Volatile Capital Flows in Korea (pp. 247-257). Palgrave Macmillan US.
Tunegroup.com. 2017. About Us. [online] Available at:
http://www.tunegroup.com/about.html [Accessed 20 Nov. 2017].