Aspects of Diversification - A Case of Ebac-Norfrost
Acquiring a new business can lead to so many problems, such as what Ebac found when they bought Norfrost for £1million. A bankrupt chest freezer business once given the go-ahead to make Coke-Cola freezers for the Olympics in need of a re-brand and a new lease of life. Well, this is what Ebac saw anyways.
However, one of the main problems when acquiring a new business is the fact that the acquirers (already being successful), think that they know it all. Successful in dehumidifiers and water coolers isn't the same as being successful in a fridge/freezer market worth £600m. Indesit (Italy) and Beko (Turkey) have market dominance and can compete on price with anything British made. So how do you become successful in a new market?
In the case of acquiring a new business, what needs to be done first is called Due Diligence! Without this (basically checking to make sure everything seems okay), millions of pounds (or dollars to appeal to an international crowd) can be wasted in buying a business, only to find out the machines you bought do not work or the business had huge debts you didn't know existed. This will cost you money through productivity lost and in general monetary terms. I implore you to take a look at the lack of due diligence that was undertaken when RBS acquired ABN Amro and how much ultimately it cost them.
Secondly, research, research, research (do I need to emphasise my point?). There is no point going into a new market on the basis of 'I am already successful and know everything' or 'We will go with whatever the company we acquired have done'. You need to make sure you have the most up-to-date data possible. This involves primary research (or I guess you could look at Mintel reports as a start) by going to your customers and asking what do they want? What are their drivers to buy the product? These opinions will either make you a success or a failure. Many in business know, if you do not know your customer, you are destined to fail like so many before you. This has been so apparent in other industries, such as where Nokia did not react to what their customers wanted and rapidly declined when Apple and Samsung released their smartphones.
Leading on from your research, the company needs to make use of their marketing abilities to get the brand out and known to consumers. Create that USP (unique selling point) that is not generic like 'affordable' or 'quality'; make it something to do with your long heritage or simply 'Made in Britain' (which is becoming fashionable again nowadays). In the case of Ebac, they were held back by the fact that they didn't know the uses of social media as a marketing tool or even what their USP was. Once they embraced it, they flourished. This brings me onto my next point with marketing. Whatever the product, marketing can be done successfully. Ebac wanted to go into chest-freezers. Interesting right? It's not an enlightened fact that chest-freezers are not the most widely searched term daily, therefore traffic would be low. However, knowing their key customers through research, they could identify the people who bought the product and then cater marketing towards them; in this case it was recipes which millions of people search for daily.
However, the key to everything (whether acquiring a business, undertaking market research or marketing itself) is planning. You must plan to succeed. As the old saying goes, Fail to Plan, Plan to Fail (oh how I hate cliche's).
