On Tuesday, we discussed implementing strategy across multiple industries. The advantages of a multidivisional structure include enhanced corporate financial control, enhanced strategic control, profitable long-run growth and stronger pursuits of internal efficiency. However, companies often face problems when implementing multidivisional structures, such as restrictive financial controls, competition for resources, and the need to establish divisional-HQ corporate authority relationships. We also learned about the differences between related and unrelated diversification. Related diversification leads to gains derived from transfer, sharing, or leveraging across divisions. Unrelated diversification does not provide any exchange or linkage among divisions, but diversifies across different product and service lines.
We have been researching Whole Foods Market for our capstone project, and one of our strategic recommendations for the company is to invest in related diversification by creating free-standing restaurants that complement their grocery stores. Because the company already has a very strong prepared-foods section in most of their grocery stores that is laid out like a food court, we believe the next logical step is to implement actual restaurants that utilize the Whole Foods brand and will cater to their target customer base.
Another recommendation we had for the company was to expand internationally. Whole Foods must pursue a localization strategy, which requires local responsiveness and decentralized control to each country it operates in. This global-level strategy will ensure that their foreign locations cater to the tastes and preferences of the local customer base.