Case Scenario 1: Syco. Sycois a diversified company that has six primary lines of business. Fifty percent of its revenues and 18 percent of its profits come from retailing. Most of its retail outlets are discount department stores that serve as anchor tenants for large suburban shopping malls. The remaining businesses are broken out as follows: Insurance accounts for 30 percent of revenues and 50 percent of profits; consumer credit card operations are 6 percent of sales and 17 percent of profits; 5 percent of revenues and 6 percent of profits come from its stock brokerage business; commercial and residential real estate operations generate 4 percent of sales and 8 percent of profits; finally, 5 percent of revenues and 1 percent of profits come from its online portal business. The company’s management states that all these businesses are essential to its competitive future.
Questions 1-3 pertain to Case Scenario 1: Syco
1. (Refer to Case Scenario 1) Why might there be so much variability among the proportion of sales versus profitability contributed by each of the businesses? Does this mean that Syco is more successful in its insurance business than in its retail business?
2. (Refer to Case Scenario 1) Develop a logical argument that would lead you to describe Syco’s diversification type as related linked and another logical argument that Syco’s diversification type is related constrained. For both the related linked and for the related constrained arguments, what product, technological, or distribution activities might link these businesses together?
3. (Refer to Case Scenario 1) Would you describe either of the logical arguments you developed in response to question 2 as a good corporate strategies?