This paper will examine the benefits and downsides that a company can experience when switching industries and assess the feasibility of such a decision.
The article by Hirsh and Rangan discusses how CEOs might be tempted to switch industries due to perceived benefits. I have learned that this strategy is more likely to be detrimental to a company’s success (Hirsh and Rangan, 2013). The company from the example must examine new markets for their future potential and reasons behind the current high performance that made this switch desirable. Moreover, it is essential to analyze what structural changes must be made to adapt an existing workforce to new conditions.
Commitment to such a drastic move in a company’s direction requires a significant amount of knowledge regarding the current and future conditions of both markets. While it can be done as a part of experimentation, it is vital to assess whether or not a company is compatible with this switch, what improvements are expected, and how complex this process is (Johnson et al., 2020). These issues can be overcome, especially when a new industry is adjacent to the previous one (Young Entrepreneur Council, 2017). Due to the number of potential faulty assumptions, extensive analysis is required during such a process. Considerations of a company’s current positioning and the economic logic behind CEOs’ decisions are the primary points of a well-defined strategy (Hambrick and Fredrikson, 2005). A firm can overcome these challenges, although the risks are high.
It might be worth overcoming the potential issues in some cases. Technologies continue to evolve, driving markets towards new, sometimes unexpected directions, which can make previously successful markets unfeasible while creating new, promising ones (Kaeser, 2018). Some extreme events, for example, the COVID-19 pandemic, provided an opportunity for some companies to successfully change an industry due to a massive influx of investments (Lang, 2020). However, these technological advancements and events are unpredictable and should be viewed with caution.
Hambrick, D. C. and Fredrikson, J. W. (2005) ‘Are you sure you have a strategy?,’ Academy of Management Review Executive, 19(4): 51-62. Web.
Hirsh, E. and Rangan, K. (2013) The Grass Isn’t Greener, Harvard Business Review. Web.
Johnson, G. et al. (2020) Fundamentals of strategy. 5th ed. Harlow: Pearson.
Kaeser, J. (2018) The world is changing. Here’s how companies must adapt. World Economic Forum. Web.
Lang, H. (2020) Companies changing their businesses to combat COVID-19, Stacker. Web.
Young Entrepreneur Council (2017) 14 Innovative Companies That Are Revolutionizing Their Industries, HuffPost. Web.