Diversification Into Luxury Goods Paper Example

Introduction

In the business world, businesses strive very hard to ensure that they control the market by all means. The move is aimed at ensuring that they reduce or completely eliminate competition to control a wider customer base which would eventually lead to maximum profit margins of the firm. Some of the methods that the companies use to ensure this includes market ventures, takeovers, amalgamation and introduction of various new products in the market to ensure control of the customers. In line with this, businesses try to thrive by all means regardless of the purported outcome as discussed below.

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Importance of joint ventures

A joint venture can be defined as a strategic alliance in which two or more people doing business form a kind of partnership in order to share markets as well as intellectual property, assets, experiences, knowledge and generated profits. In a joint venture, there is no transfer of ownership which may compromise the situation and make it a merger. The method is very advantageous in the following aspects;

The first situation where a joint venture important is that it can help in fast growth of businesses. It is because during a business venture, partners come up with unique ideas which facilitates the inculcation of business growth. The business is able to integrate such ideas for its development hence leading to faster growth of the business. Similarly, the joint ventures controls more capital base as compared to single businesses and hence is able to stock variety of items for customers which increases the profit margins of the said businesses.

The second scenario where the joint ventures is important is the role it plays in increasing the productivity of the business. Sharing of ideas from different partners makes the business to have diversity which leads to high productivity. The business is able to venture in various fields and operate them effectively which thus results into the high productivity of the joint venture. Most businesses are formed with the sole aim of improving productivity which is geared towards increasing revenues for the maximum control of the market.

During formation of a business organization, the entrepreneurs always aim in making profit. Joint ventures are very good as they increase the profit margins of individual businesses without a lot of strain. The improved profit margin thus acts as one of the advantages of joint ventures as it does not involve total transfer of ownership which would mean that individuals are free to withdraw from the joint venture whenever they feel that their interests are not well taken care of by the other members.

Steps of developing diversity strategies

Diversity strategies are those strategies which are aimed at employment different people with different cultural backgrounds and believes in an organization

The corporate world requires a lot of professionalism and much intelligence for it to be managed properly. In most cases, the managers try to find the best ways in which they can employ to ensure maximum revenues and profits are realized in an organization. In order to achieve this, the organization must have well defined cultural practices which the employees must conform to in a bid to provide sanity and professionalism in their services. As such, there must be a best follow up procedure which constantly checks whether the set rules and organizational cultures are followed (Okonkwo, 2013).

Companies normally enter into contracts with other companies for the purpose of maximizing their outputs and profits. These contracts involve purchases and sales that are mean to improve a particular company's revenues in general. Derivative contracts can thus be defined as a contract based on another contract but independent of it and involves a party that is not associated with the first contract. For example a butcher enters into a contract with a slaughter owner to sell meat and the slaughter owner enters into a contract with pastoralists to buy cattle to be slaughter from them.

The item 7 "Management Discussion and Analysis" released in June 2015 shows the unaudited condensed consolidated financial statements of the Company for the 13-week period ended May 2, 2015. The report contains commentary from the Company's management regarding strategy, operating results and financial position. Management is responsible for its accuracy, integrity and objectivity, and develops, maintains and supports the necessary systems and controls to provide reasonable assurance as to the accuracy of the comments. The report shows a general increase in the financial profitability compared to the same period of time in the previous year.

In any organization, ethical behavior is required as it shapes the future of the organization by making the clients trust and fully believes in the organization. In case the ethical standards are not set and followed, the organization risks collapsing as no client would love to associate themselves with such an organization. It is, therefore, important for the managers to ensure that an organization is operated on a solid foundation of the ethical rules and conduct which are transformed to be the culture of the organization (Aras & Crowther, 2010).

On the other hand the derivative contracts had several benefits on the company. The merger with Kmart led to reduced competition from competitors such as Wal-Mart that enable the sears to minimize the amount used for advertisements. The second benefit was generated from acquiring the brand trademarks of three other companies which boosted the knowledge of its products to its customers. The last benefit was through engagement in the automobile sales that enable the company to diversify its operations hence attracting more investors in 2013.

The Sears Holdings Corporation being one of the companies whose main aspirations is to make profits has entered into derivative contracts with other companies and corporations. Some of the major derivative contract it entered into includes; in 2005, the company signed a contract with the Kmart to purchase all locations and brand name resulting to Kmart stores being converted to Sears Essentials, as well as a few locations that were acquired from Wal-Mart and several bankrupt discount retailers. The second derivative contract that the company entered in was in 2007 when the company placed its three major brands in KCD IP, a "separate, wholly owned, bankruptcy-remote subsidiary". The KCD stands for the three brands: Kenmore, Craftsman, DieHard. In return the KCD IP then issued $1.8 billion in bonds that were sold to Sears' insurance subsidiary based in Bermuda. The last derivative contract by the Sears Holdings Corporation was the launching of the Sears Automotive business of new Independent Sears Auto Center franchise program that would offer automobile dealers the opportunity to operate licensed Sears Auto Centers. The first dealership that is the Coleman Auto Group of East Windsor, and New Jersey were expected to open a Sears's auto center.

References

Henri Drouhin, P. A., & Simon, A. (2014). Are property derivatives a leading indicator of the real estate market?. Journal of European Real Estate Research, 7(2), 158-180.

LaFrance, M., Lange, D. L., & Myers, G. (2007). Intellectual Property Cases and Materials. Thomson West.

Muheki, M. K., Lueg, K., Lueg, R., & Schmaltz, C. (2014). How business reporting changed during the financial crisis: a comparative case study of two large US banks. Problems and Perspectives in Management, 12(1), 191-208.