How can related diversification create a competitive advanta

How can related diversification create a competitive advantage for the firm? Keeping the advantages of related diversification in mind, think back to the example in the chapter of Delta’s vertical integration decision to acquire an oil refinery—clearly an unrelated diversification move. What challenges might Delta confront in operating this refinery? Think of the strategic concepts you have learned and how they can help you evaluate Delta’s decision.

Solution

Ans -

In order for the diversified company to fully attain its competitive benefits of its diversification strategy. it must thoroughly understand its present corporate strategyby examining all aspects of the business as they relate to builsing a sustainable competitive advantage. The company must have a grasp of its current overall strategy before gaining the reap benefits of diversification.

The firm must evaluate the long - term atrractiveness of each of the industries in which it has businesses. One approach is to identify those factors that make a business unit competitive, assign weight to each factor, and then rate each business on a scale from 1 to 10 . Once the weighted ratings are added together, the firm will have a fairly good idea of the general competitive strength of its different business units.Resource fit test must be determined by the company to identify which of its business units have competitively appealing value chain synergies that can help the firm obtain cost reductions, transfer technological skills and intellectual capital, leverage a well known brand name, or create valuable new competitive capabilities.

The conclusion is that the competitively appealing value chain synergies are the true soures of sustainable competitive advantage.

The main challenges that Delta might confront in operating this refinery is significant freight disruption especially during the extreme cold periods . The trains use air brake system that pushes the air into the cars to release the brakes to operate and that air push becomes more difficult in colder air. So the trains are shortened to accomodate fewer cars, causing the need for more trains to be operating.