The reading this week discussed the method to conduct competitor analysis and indicated that you must consider who offers products similar to you and who offers products that are substitutes to you. Yet in the today's economy defining which companies are competing can often be blurred because of the large, diversified portfolios and subsidiaries of many of the large Fortune 500 companies. I took a look at the some of the most profitable US Fortune 500s. Companies in the top 20 included, Apple, Johnson & Johnson, Proctor & Gamble, General Electric, Intel, and Google. (CNN Money). Johnson & Johnson has over 230 subsidiaries and produces products ranging from hip replacements to hair shampoo. Google is known for its product diversification and “throw it against the wall and hope it sticks approach.” We often just think of the web search features, but Google has explored with operating systems, desktop applications, mobile phone programs, publishing products, and even hardware products. I never real though about the diversification in Google products until I started to think about Google Wallet, Google TV, and the Android operating system. GE is another example of a company that has its hand in everything. Something common among all these firms is the diversification of products within a specific industry and a presence globally.
With so many of the largest and most profitable companies having an aggressive approach to exploring new products and getting into new markets, I am curious how this changes the concept of competitors. Traditionally I think of Google competitors as Yahoo or Bing, but I realize their breadth in different industries makes the company a competitor with so many other organizations. I recently read a case about Google toying around with an online payment system and how threatened PayPal was by this possible product introduction. With a few small companies acquiring so subsidiaries in various market places, will this create economies of scales that will shut down new potential competitors? At one point will these companies decide diversifying products is not the best strategy but instead focus on improving the current product lines? I also began to wonder if it makes sense for a company to focus on one product line, because as we discussed there operational effectiveness no longer ensures competitive advantage. It seems like the days are gone where producing the best product, most efficiently was enough to ensure profitability for your company. Instead successful companies seem to offer the most innovation products, in a variety of spaces, and be willing to expand explore global markets. Ultimately, this strategy seems to work for companies as long as the products are somewhat related. Yet I wonder if there will be the point in which Google’s portfolio of companies will be too broad or if GE will decide they need to narrow the scope of their strategy. At what point will being too broad take away from the core competencies of an organization—or is this something that we are already experiencing with some of our Fortune 500 leaders?