One way companies grow is to launch new businesses into market segments where they have not previously competed. For example, GE, starting with an incandescent lamp business, has moved to businesses covering more than 700 product markets. By all counts, GE's diversification strategies have been successful.

On the other hand, consider the case of McDonald's' diversification strategy of entering the hotel business in Switzerland. In March of 2001, they opened two hotels, and as a result of poor performance, by August 2003 the decision was made to sell the hotels.

Review the video clip about McDonald's Golden Arch Hotel in Zurich, Switzerland and then comment on why you think their diversification strategy failed?

 

Diversification strategy in businesses is always a good way of expanding the business and venturing into untapped niche in the market. McDonald is a big fast food business which is widely popular and loved by many. When venturing into new business, a lot of factors need to be considered such as the culture , the population and the economy of the new location.

Step-by-step explanation

The two restaurants failed because; the McDonalds changed their name to Golden Arch hotel, the name did not seat well with most Germany countries so as the Swiss people. The travelers who were aimed to use the hotel said the hotel was unhomely and uncomfortable. The glasses used did not allow privacy but later they frosted them which still did not pull any new clients. The hotels were 24hrs which is very unlikely for the Swiss people. The restaurants failed because the McDonald did not meet the Swiss culture through the hotel leading to more losses than gains.