Failed Diversification:

1. National Semiconductor Corporation

One example of failed diversification is National Semiconductor Corporation. The
company tried to make electronic consumer products in addition to the semi-conductors
that went inside them (in the 1970s). But they overlooked one major flaw: the company
wasn’t suited for retail manufacturing. In the process, it was crushed by companies that
were very well suited for that purpose as well as insulated against any kind of financial
downturn. By the time digital watches became popular in America (the company
specialized in analog devices and subsystems), NSC had been driven from the
marketplace, suffering huge losses that largely overshadowed its success in the arena of
semiconductors.

2. Northrop Grumman
A more recent example of failed diversification is Northrop Grumman–an American
global aerospace and defense technology company and the fifth-largest defense
contractor in the world as of 2015, according to the wiki. Northrop has always been
successful with electronics and robotic systems, but in 2001 it diversified into
shipbuilding for the Navy. The venture was obviously very expensive, and a titanic one at
that. The diversified plan had razor-thin margins and did not tune with any of Northrop’s
other businesses. In 2011, Northrop declared that they got out of the shipping business to
avoid “a drag on its bottom line for years to come.”

3. Virgin Cola
Virgin’s move to lock horns with Pepsi and Coca Cola is one that is legendary. Though
Virgin’s brand encompassed virtually everything—from airlines to financial services,
Richard Branson, founder of the Virgin empire, stretched himself too far. Coca Cola and
Pepsi, as we all know, is synonymous with the elixir of life. Branson joined forces with
Cott Corporation, and produced Cola under the Virgin name and marketed it
spectacularly in New York’s Times Square. This move raised eyebrows from market
observers as they knew it was difficult to take down Pepsi and Coca Cola.

Although Virgin Cola was priced significantly lower (15 to 20%) than the two leading
brands, there were not enough customers. Partly, issues with distribution were to be
blamed. Pepsi and Coca Cola managed to block Virgin from getting shelf space in more
than half of the UK’s leading supermarkets. Meanwhile, Coke doubled its advertising
budget. Virgin Cola failed to make even a single scratch in its worldwide sales. The band
struggled to gain 3% of the market and has never made a profit even on its home turf, the
UK.