A strategy will be defined as the distribution of the firm resources, and hence the distribution of its output among industries. Corporate businesses always pose the question about their diversification strategies, and the advantages and disadvantages associated. Many companies became bothered by putting all its eggs into one basket; therefore companies had to come up with certain strategies. Conglomerates are companies that follow the diversification strategies. Diversification is reducing risk by investing a number of assets. In the 1950s, diversification gave companies a boost, while still increasing into today. Fortune 500 companies are best described as conglomerates. These conglomerates found out by taking risk in a single stock they would be manifested to index movements and stocks relative movements. Portfolio models in corporate business are looked at as either vertical or horizontal. Vertical is expanding the product line and horizontal is integrating with the supply chain. Companies diversify to grow, to utilize existing resources or to escape their environments. Advantages could include achievement on the economic scale and to expand product offering while disadvantages could be difficulty coordinating the business. Another problem with diversifying can be the manager lack of knowledge about the business. Successful strategies of managers are developing skills in diversification. They must also have well-developed beliefs how to diversify in order to achieve synergies. To achieve synergy you must exploit economic scale and scope while efficiently allocating capital.
In comparison the BellSouth Corporation and BIC Corporation utilized the diversification strategy. BellSouth was incorporated in 1983 providing telecommunications through Internet, video, voice, and entertainment. BellSouth was formed through a breakup with American Telephone and Telegraph. BellSouth began the as the 12th largest corporation in the United States. AT&T used the south as a testing ground, which gave BellSouth a lead in high Technology services. Advances in technology allowed companies to tie directly into the long distance system through microwave antennas. In the late 1980s BellSouth was the fastest holding company. Adding more than six hundred thousand lines a year, BellSouth had the largest sales at around fourteen billion. BellSouth won a contract with the government, but withdrew their bid because of accusations about the improperly obtained information from government employees. So the government gave the contract to AT&T. Competition heated up stemming from the breakup, kept BellSouth from expanding into a broader range of services. Companies began to migrate into BellSouth territories and stringing fiber optic cable. BellSouth moved cautiously to avoid the invasion. BellSouth invested in a joint venture with Disney producing innovative entertainment programs. This was they first step into the media and entertainment world. By partnering with several companies BellSouth had to lay off some thousands of workers. In the late 1990s competition was not bad for business, as BellSouth lost accounts, they picked up money by selling access to its lines and offering around the clock customer service. Although changing drastically, business continued to grow in revenue and services.
While the BIC Corporation was incorporated in the late 1950s, they were the leading manufacture of disposable ballpoint pens and cigarette lighters, BIC also manufacture and sale stationery products. Marcel Bich founded BIC and set up his business manufacturing parts for fountain pens and mechanical pencils. The very expensive ballpoint pens were popular in Europe, while in the United States the pen did not catch on quickly. BIC aggressively launched television advertising that the BIC pen could perform as well as some leading pens. The advertisement included the pen being drilled, shot from a gun, and even fire blasted, and