Case_In_Point_7th_Edition_Page001_183_2

One example might be to look to see if there is a sister industry where our customer list is the
+ Yebbow Stuff Chemical Company
Case 2: Our client is a manufacturer that makes industrial cleaning solvents and pesticides.
Recently, sales have been declining, mostly due to new EPA guidelines. The company has
been “dumping” its old products overseas into countries that have less stringent
environmental laws as well as re-engineering its products to fit the new EPA guidelines.
Further evaluation of sales, both past and future, indicates that the chemical industry has, and
will, continue to grow slowly over the next five to seven years, with 3% annual growth.
Management has decided to diversify. While Yellow Stuff wants to keep its chemical business
intact, it also wants to enter an industry that has long-term, high-growth potential. Yellow Stuff
has hired us to help determine what industry or industries it should enter.
While I don’t want you to come up with a list of industries, I do want you to tell me what sort of
things you should be researching to determine what industry our client should diversify into.
So, as I understand it, our client is a chemical manufacturer who wants to diversify outside the
chemical industry into a high-growth industry.
– That’s right.
And you want me to come up with a strategy on how to find the best possible match.
– Yes.
Besides diversification and profit, are there any other objectives that I should know about?
– No.
What does the company define as high growth?
– 10% a year.
Well, the first thing I’d do is obtain a list of all the industries and eliminate the ones that are
growing less than 15% or have a potential in the next year of growing less than 15%. How
much risk is Yellow Stuff willing to take?
– Medium.
Then, I’d also eliminate any high-risk or volatile industries. Next, I’d study the list to see if there
are any synergies that we can share.
– Such as?