Use of Unrelated Diversification Strategy to Respond to Idle Capacity: a Case Study of Nation Media Group

Abstract

Although much work has been done on Strategy formulation in organizations, significant gaps exist in the body of research regards strategies purposefully formulated to take up Idle or Excess capacity. Few explicit connections have been made among research studies between unrelated diversification and Idle or Excess capacity. This research paper explores this crucial relationship and introduces a view that firstly idle capacity is a resource and secondly, that unrelated diversification can be used as a strategy to utilize idle capacity where this idle capacity cannot reasonably be used to produce the core product or its close variants. The paper begins by conceptualizing Capacity along three dimensions; Capacity Management, Complexity of Capacity Management, How Idle Capacity arises and how idle capacity can be taken up using an unrelated diversification strategy. The study goes on to discuss how Nation Media Group's transport Division has utilized its idle capacity through the use of unrelated diversification strategy. The findings reveal that there is a direct and distinct positive consequence of this strategy. The research summarizes the findings in a way that provides great insight into how an organization’s performance can be greatly impacted by the uptake, or lack of it, of idle or excess capacity making it a double edged sword. The findings also provide insights into how uptake of idle capacity impacts on revenue and contribution within a business. Further, a bigger idea emerges that; an entire business line can be founded on idle capacity. The research supports the Strategic Management theory that unrelated diversification is for financial gain and pursuing strategic fit relationships assumes a back-seat role in the case of unrelated diversification. To the extent that corporate managers are astute at spotting external opportunities with big profit potential, shareholders wealth can be enhanced greatly by analyzing the existing value chain for hidden opportunities which manifest as idle or excess capacity.