Friday, April 17, 2015

Uber Can Diversify Without Much Risk

When most companies diversify, they have to be as risk averse as possible, or their core business can get tangled into their new branches organizationally and this can bring down the company as a whole. When the average business diversifies, they are doing so in order to capture economies of scale. This involves merging organizational chains so that employees can perform their same tasks, just slightly more of them. The result is less employees (less costs) than if there were two standalone businesses.

With Uber, they don't need much overlap in their businesses when the diversify. Uber is really capturing value from the Uber name as well as the concept that it promotes. I don't know this for sure, but I can't believe that the executive officers involved with the traditional Uber business have much to do with UberChopper or UberIceCream. The only real similarities are the app (which is still a different app) and the business model.

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