What is diversification? Amazon diversifies and delivers food at home.

Amazon fresh truck

When I write a new news article I do not like it to remain a mere informative article, but I prefer to explain, at least broadly, those economic concepts or companies that are cited so that in this way we can put ourselves in context and better understand the news.

In this case, the concept that comes into play is that of business diversification:

What is diversification?

Well, all companies look for and investigate how to obtain competitive advantages, A competitive advantage is a characteristic that the company must develop to reinforce an advantageous position with respect to its competitors and in this way, increase its benefits.

For this, the company must trace what strategies it will continue in the competitive, functional and corporate sphere. We will talk about the first two in future articles.

Corporate strategy, is therefore the one that understands the decisions of the company about in which businesses compete and in which sectors will it stop competing, that is, its scope of action.

When companies have to make decisions about corporate strategy, they have to make them according to 3D: the vertical, the geographical and the horizontal, equally, we will talk about the first two in the future.

According to the horizontal dimension, the company has to decide in which sectors it will compete, that is, if it makes the decision to diversify.

Once we have framed our concept, we can say that business diversification consists of expanding the business wallet of a company offering new products or entering new markets.

Within this diversification, they are distinguished two different types:

  • Related diversification: When there is some connection or link between the old sector and the new one. For example, when the apple company, dedicated to technological innovation, decided to diversify and open up to the world of mobile phones in 2007 (also a technology sector).
  • Unrelated diversification:   When there is no more relationship between businesses than a financial relationship, that is, the origin of resources. For example, the TATA company that is dedicated to such disparate sectors, such as the cultivation of tea or the manufacture of cars. As we can see, they have nothing to do with each other.

What is the specific case of Amazon?

The case of Amazon is a case difficult to classify since if, on the one hand, it is about online commerce, a sector in which it is specialized, on the other, the product they offer are foods, a sector in which until now they were not present, in my opinion, one could rather speak of a diversification not related.

Diversification that Amazon materializes in two different, but complementary services for its customers:

Amazon Fresh Bags

  • Amazon Fresh, a food delivery service, which allows customers to order their purchase and receive it in less than 24 hours. A service that can be enjoyed in Seattle since 2013 but has not reached Europe until September of this year, specifically Germany and Austria.

amazon local website

  •  AmazonLocal, a kind of JUST EAT, that is to say, an online platform to which restaurants, in this case and for the time being, from Seattle "subscribe" and which puts them in contact with customers who want them to send them food already cooked at home. . Acting Amazon as a mere intermediary that puts customers in contact with restaurants and depending on the price as well as the shipment of the latter.

Maybe soon we will see these services coming from the sales giant to our country, although by then I hope they already have their tax headquarters in Spain, and therefore do not make a Unfair competition against those companies that do comply with the legislation.

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