Should Successful Companies Diversify?

This morning on CNN they made mention about Ford selling off Land Rover and Jaguar to a company in India called Tata, which sells low-end vehicles in the $2500 range. What a deal. Tata got both companies for 1/2 of what Ford originally paid for it. Which brought to mind something I have been wondering about. Should successful companies diversify?

Look at Microsoft. Here is a company that has a lock on the world with 90% of us using their software. Windows and Office have become the standard. So when Microsoft introduced Money did they really think they would knock Quicken off of their perch? How about the X-Box which cost Microsoft 1 Billion big ones when the failure rate shot up to about 30%? With a lock on Windows and the Office part of the market, why try to diversify? If when they cheated making IE a part of the OS, browsers such as Firefox and slowly taking market share away.

Look at Dell. They were doing just fine selling computers and being in the number one position. Than they started to diversify into televisions, hand held devices, printers and other  diversities. Before they knew it, they were in trouble. I believe they still have their printer offerings but have even changed the way they deliver replacement ink. If you ran out of ink, who was going to wait a week or two for a replacement via mail?

It should be interesting to see how Tata fairs with the Land Rover and Jaguar line of vehicles. But what makes me think in the back of my mine that if Ford couldn’t make it work, why will Tata?

What do you think? Is diversity a good thing or can major companies make it work?

Comments welcome.

Tags: diversity, ford, land rover, jaguar, windows, dell, tv, printers, hand held, devices,