HowRu, a private card business and its subsidiary, have a 14% share of the greeting card market. The card business is subject to seasonal cycles, with sales being highest during the holiday season. For this assignment, please complete the following:
- What steps can this company take to diversify its portfolio?
- Define diversification and its necessity in risk management.
- Discuss at least 5 steps to diversify the card business.
- Please give at least 6 suggestions of how and where funds can be allocated for new investments.
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Comments on IP3
IP3 is very broad. Here the word “portfolio” is not referring to a financial portfolio of bonds and stocks, etc. It is referring to the business portfolio of HowRu
It owns a big market share of a seasonal business, so you want to talk about managing its business risk.
Diversification is the key. So you need to define that.
You will need to decide how and where to diversify (other areas which are not that seasonal, or different patterns of seasonality), the 5 steps are the steps you take to make that diversification decision.
Once you have decided the diversification areas, you will need to invest in those areas.
The last question is about how you allocate your capital (new store? new shelf space? new employees? etc )
Note: You can also use financial derivatives to diversify