Diversification Strategy 1

Factor Which Motivate A Firm To Diversify

Charles McCarthy

Aston American University

MGT340-Strategic Management

Instructor: Timothy Johnson

May 2019
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INTRODUCTION

Diversification is a business strategy whereby new products are introduced or markets pursued.

This strategic decision may be brought on as current products or markets are already saturated by

competitors or the firm focus on possible investment opportunities therefore diversify their product or

market segment decisions. Clark (1996) say firms are driven to diversify due to the continuous change

of the surrounding “social and business environment” therefore play a significant role in …

THE IMPORTANCE OF AN ETHICAL MODEL

One of the best strategies any manager or entrepreneur can think about before opening their

business to the public is to practice and maintain ethical standard. A good practice or approach to

maintain ethical model within a business can help the business to have a competitive advantage and

enjoy a long term relationship from its customers and the general public. Long (n.d.) says that that

ethical behavior on the part of any company and its employees can translate into a valuable long-term

relationship with both customers and business partners. The author continues by mentioning that every

transaction in a business can be trusted, secured and guaranteed when a business chose to be and remain

ethical in its day to day to operations. Hill (n.d.) believes that being ethical in a business means applying

principles of honesty, fairness to relationship with coworkers and customers. According to Hill,

businesses enjoy or benefit from the following when they are ethical:

1. Loyal Customer: Ethical businesses will always have loyal customers who would even

disseminate the information to the public about them. A company’s reputation and excellent

customer services can attract more customers and create a cohesive and long term relationship

between them and their customers.

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2. Retaining Good Employees: Almost every employee would like a company to pay fair

compensation and disseminate fair information about the company to them as well. Sometimes

employees become reluctant, inconsistent and not committed to their jobs when they think that

they are not being compensated unfairly. Companies that are ethical and open to their employees

have the possibility of maintaining as well as retaining qualified employees.

3. Positive work environment: There is a great deal of collaboration or team work in a company

that train its employees how to be ethical. Employees will always develop positive relationship

with one another when there are rules, regulations or guidelines to regulate their behavior. A

conducive working environment can be experienced when there is an ethical model in place.

4. Avoid legal problems: Companies that maintain ethical standards obey the laws. They do not

cut corners or behave unethically in order to maximize profit. Therefore, ethical entities are

always freed from paying legal fees or fines/penalties.

HOW TO ESTABLISH AN ETHICAL MODEL

In the absence of rules and regulations, unethical practices would dominate a business’ operations.

Every business should establish an ethical model to serve as a moral compass for both the employees

and the customers. Instilling an ethical model within a work place would ensure that there is less

possibility of doing wrong and a high possibility of being professional. Maintaining ethical standards

within a work place would involve setting expectations and regularly providing guidelines for being

ethical. According to Moran (2012), an ethical model within a company can be established when

managers or entrepreneurs follow the following steps below:

1. Make Policies/Expectations: This can be implemented by giving out the company’s ethical

code of conduct, having orientations, trainings and regular tutorials about ethical behavior. These
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trainings should include but not limited to: employee’s conducts, attire, punctuality, personal

hygiene and company’s culture.

2. Enforcing Policies: The violation of any policy or rule by any employee should be rewarded

with a penalty as prescribed within the company’s ethical code of conduct. This does not exclude

the entrepreneur or line managers. Managers should serve as role model for employees. They

should be a moral compass that employees can follow. They should practice what they preach.

Employees might just follow their manager’s foot step if they choose to also be unethical.

3. Be your own change: Ethical behaviors must be reinforced routinely and displayed within the

company. Employees might feel reluctant to abide by rules and regulations if managers are not

consistent in enforcing them.

CONCLUSION

While the importance of ethics is clear, we must make sure as business students to takeaway

these values and use them in future corporations where we may work. Otherwise, we can help a

company like Enron go up in smoke. Hazels (2015) writes that “in this Post-Enron era, the creation

of statutes and policies to aid in the efforts to prosecute white collar crime have altered the ways

companies can and will operate” as the cost makes it difficult for a company not to bend all of the

new rules concerning ethics. The author also says that some people also believe that so much

legislation “has caused companies to focus on following the letter of the law and not focus on acting

ethically” (pg. 85). As business students, we must make an effort to understand business laws. As

Hazels says we should “understand the basic concepts and theories for which those laws are based.

Law and ethics go across diverse groups of individuals; these rules apply regardless of race, gender,

religion, and so on” (pg. 87).

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References

Xing, X. (2003). Essays on firm diversification (Order No. 3091982). Available from ProQuest Central.

(305309497). Retrieved from https://search.proquest.com/docview/305309497?

accountid=196939

Clarke, R. L. (1996). Why diversify? Healthcare Financial Management, 50(4), 12. Retrieved from

https://search.proquest.com/docview/196372014?accountid=196939