Essay Sample on Advaark: To Risk or Stick? Diversifying in Uncertain Times

The case explores the most crucial and fundamental issues facing enterprises. The question is whether to risk diversifying into unchartered areas of business with the situation of not having enough resources or stick to core business whose returns are already satisfied. Advaark is a thriving company located in New York, and it is in the business of advertising. It is a $550 million Company with 400 employees. Recently one of the founders of the company Rafferty advised one of their clients Globalbev an idea of venturing into energy drinks. The information was provided based on market research and the probability for the business to grow. The plan for growth from one of the partners brings Advaark at a strategic business dilemma of deciding whether to get into the new line of business or sticking to their core competence. Partner 1 is not contented with the current only one company and thinks they should slowly venture into services of selling strategic business advice to their clients. On the other hand, partner 2 feels it is not wise to begin a new business whose fate is not known but says they should stay in their core competence, which is building a world-class advertising agency. Caldwell argues that if they diversify, they might go down in their strategic focus, failing and ruined relationships with their long term clients.

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Advaark's core competence is advertising agency services, which has grown to $500 million with 400 employees implying that it is doing well. Based on the core competence of Advaark, they should consider diversity into a new business so that they can have a competitive advantage. According to Prahalad and Hamel (1990), there is a need for diversification to rip the benefits of competitive advantage. The authors give examples of various big companies that grew through diversifying from core businesses, for instance, Canon, Honda, and Sony, among others.

It is advisable for Advaark to diversify into other fields that are related to their core competence, for instance, digital marketing, Market research analyst, and branding. The three services are related to the advertising job that the company is doing. The authors state, "canon has given us personal copiers; Honda has moved from motorcycles to four wheels off-road buggies. Sony developed the 8mm camcorder, Yamaha, the digital piano. Komatsu developed a remote-controlled underwater bull-dozer while Casio's latest gambit is a small screen color television" (Prahalad & Hamel, 1990). In this case, it is an indication that businesses should diversify to make more returns and also curb any risks that are brought about the dynamics in the business environment. The authors argue that a core competence business should first be established, and collective learning developed.

Advaark should consider venturing into new markets by using a competitive advantage, which is having an established company that has a vast number of clientele. The clients will be its market, implying that there is already a ready market. Additionally, the service of advising Globalbev got a good reception, meaning if it incorporates new services, they will have a ready market and success in diversifying. The company should also consider expanding into the new market so that it can utilize the latest technologies and increase its profits.

The growth alternatives available for Advaark are strategic market research, survey, and branding. Strategic market research can be done for clients who require such services for their businesses. Because Advaark already has a vast clientele, it can begin to inform them about the availability of the services. Just like it advised Globalbev regarding venturing into energy drink business after doing market research and establishing feasibility and its viability, then it will succeed in diversifying to the alterative as its second form of trade. According to Prahalad and Hamel (1990), growth alternatives are developed from the core, implying that the other options should be related in one way or another to the central business being carried out.

The authors give an example of Canon, which began with making calculators and then diversified to copiers then TV's among other products. The products created by Casio are all electronics and therefore having a close relationship making it easy for clients to trust and purchase them. Similarly, Advaark should venture into Strategic market research for its clients because it is related to advertising, which is geared towards sensitizing clients about a company's products and services. When customers are paying for their products to be advertised by a world-class company, then .they should be informed that there are also other services offered to help in expanding their products and finding new markets to venture.

Another alternative is establishing branding options for their clients. It is also a business that is related to the advertising of products. They can research good images and logos that their clients and nonclients can use on their products. Good brand images attract customers to purchase products. In this regard, because Advaark has been good at advertising, it can be able to come up with great brand images that can redefine clients' products. It is also an alternative that is easy to introduce and also sell to clients because they believe in great ideas of advertising that Advaark has given them for the last seven years. Additionally, Prahalad and Hamel (1990) state that a company's competitiveness is derived from its performance attributes of current products. In this case, Advaark's performance attributes for their advertising business have been great, and from them, they can develop the branding alternative quiet well.

I would recommend that Advaark implements the branding strategy because they go hand in hand with the business of advertising. The company knows what images and logos' that can bring the right taste to a particular product so that it can be able to attract customers in this regard it should offer branding services to its clients. Firstly, it needs to research on the niche available for the services and be able to examine the exact needs that the clients require. After establishing the market needs of the clients, it should then gather information on what can be done to offer the most competitive services that are unique and custom made to meet their client's demands. It can implement the strategy by first researching the market of branding and consider the trends and the currently available technology. The patterns and current technology will be valuable in ensuring that Advaark does not offer branding services that are no longer marketable.

The second-best alternative could be strategic market research, which entails conducting marketing analysis on various feasible and viable opportunities that their clients can venture into. For instance, one of the partners offered advice on what product Globalbev should venture into, and other clients can also be offered the services after doing market research.

The authors further explain the aspect of diversification by a tree allegory. Prahalad and Hamal describe that a diversified corporation is like a huge tree, and they refer to the trunk and the primary branches as the core products. In contrast, the smaller ones, together with flowers, the leaves and the fruits are the business units. The authors refer to the roots as the core competence, which provides the nourishment and all the requirements for the growth of the tree. Another explanation that the scholars give is that a business is determined by its core competence product, in this case, the roots. In this regard, because the core business of Advaark is stable and has substantive growth, then it is a good idea for them to venture into new markets and earn an extra source of income as the Core competence also grows. It is an indication that diversification from a core competence is healthy for the survival of any company. Advaark will not fail if it ventures into a new business because the core competence is already stable.