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One of the effective ways of obtaining a competitive advantage and improving the agility of a business is diversifying into a new industry. The organization under consideration is a US-based company that builds engines for the automotive manufacturing industry. The sector it should diversify into is the software industry, which has rapidly developed over the past decades and provides multiple opportunities for an automotive industry company to expand its operational scope. Indeed, as stated by Llopis-Albert et al. (2021), digitalization introduces “significant improvements to the value chain by boosting efficiencies, reducing costs, and generating greater collaboration and innovation” (p. 2). The company should diversify in the technological direction because collaboration with digital companies will allow for making new products and bring more profit, improve the company image, increase compatibility, and ensure more options for development.
In order to diversify into the software industry, the company will have to find productive partnership opportunities with experienced digital companies. The company might launch a new facility chain to produce software for automobiles. To expand beyond the production of engines, new knowledge, employees, and equipment will be required. For the company to embark on a successful diversification journey, the leadership will have to initiate extensive research of the industry, the best examples of such diversification scenarios if available, and plan necessary projects.
It is anticipated that the software industry will have a sufficient amount of data available for research and analysis before launching the diversification efforts. At the point of planning, there are questions regarding the appropriate sources of information. For example, are the financial reports of automotive companies that have diversified into the software industry a valuable data source? Is it more relevant to look into quantitative or qualitative research in this area? Overall, the utilization of the latest research in automotive industry diversification and the impact of digitalization would be a reliable source of data. In addition, the business models of software companies and technological particularities related to diversification might be researched using business reports, journal articles, and communication with prospective partners.
Reference
Llopis-Albert, C., Rubio, F., & Valero, F. (2021). Impact of digital transformation on the automotive industry. Technological Forecasting and Social Change, 162, 1–9.
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