Diversification-related / Conglomeration

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It doesn't stop there, the WeWork company that has not even made a profit is trying its luck by going public on the American stock exchange. Unfortunately, it's all just talk. WeWork company always postpones their IPO schedule. Which ultimately makes their big investor; Softbank upset.

However, unfortunately the “party” did not last long. WeWork’s decision to diversify its business seemed to backfire on the company. To the point that the private school founded by WeWork was forced to close. The peak was when WeWork decided to lay off thousands of their employees. Let’s analyze what went wrong.

Starting from diversifying their business, yes. Is diversifying list of real cell phone numbers wrong? Of course not, in fact diversifying a business is good. However, there are some conditions where diversifying a business is wrong. And unfortunately, that is what happened to WeWork.

There are 2 types of business diversification:

Related / Concentric

This type of concentric diversification is a strategy for expanding a company's business by creating or acquiring companies that have related products/businesses. For example, Gojek acquired the payment gateway company midtrans. Gojek has a Go-pay product which is included in fintech, as is midtrans. From the investment that Gojek made, you can see the relationship between the two. Thus, the investment that Gojek made is expected to support the growth of Go-Pay.

Well, for this conglomerate business diversification is a strategy for expanding the company's business by creating or acquiring companies that have products / businesses that are not related to each other. For example, WeWork invests in a wave-making company, to a private school where there is no business relationship with each other.

For this type of conglomeration, it is a bit tricky. Why? On average, companies that carry out conglomeration are companies whose businesses can no longer or are difficult to develop because they are already at the peak (getting maximum profit, or have reached a dead end as Javanese people say). Therefore, these companies look for other businesses that are not related, in addition to expanding their wings, also to share the risk.