Syco Inc. (SI).
Syco, Inc. (SI) was founded in the late 1800s and grew through acquisitions from being primarily a large discount retailer into a highly diversified firm. Beyond retailing (still SI’s dominant business), by the middle of the 1990s its lines of business included significant market positions in insurance, consumer credit cards, stock brokerage, commercial and residential real estate brokerage, and an online Internet portal. Each of the non-retail businesses was average in its relative industry performance. Consistent with the decentralized structure at SI and arms-length corporate oversight, each of these businesses was also rapidly developing their own unique brands and customer following. However, within a short period of time it became apparent that the retail business was failing. SI’s vast mall-based department store holdings were suffering from deferred maintenance and merchandising that did not appear to be popular with its once large consumer base. At the same time, highly efficient and focused low-cost competitors like Wal-Mart were beginning to take significant market share from SI. On the verge of bankruptcy by early 2000, SI’s management chose to sell off its insurance, real estate and stock brokerage units; it also spun off its credit card and portal businesses in separate public offerings.
QUESTIONS TO ANSWER/DISCUSS:
1. Why do you suppose SI entered the non-retail businesses through acquisition? Is this a cheaper route than starting up these businesses from scratch?
2. Why do you suppose that SI sold off or spun-off its non-retail businesses?
3. What should SI do after selling off the non-retail businesses?
4. Syco’s acquisition strategy was appropriate since it would allow the firm to have market power over its competitors. [TRUE or FALSE– and explain why]
What the other classmate wrote in regards to question #2….
Question # 2
Syco, Inc. (SI) sold- off its non-retail business, when the corporation was failing. SI failed to integrate the business units after the acquisition and showed an inability to achieve synergy. The acquired businesses could not work together with the existing business of retailing to create value, in fact they developed into separate brands, with less oversight by corporation, while retailing faded into the background. SI chose to restructure the firm by downscoping, or eliminated businesses that are not related, when Walmart started to gain more market share in the retailing industry. This allowed SI to concentrate on the industry that they had a rich history of success with, and return to the core business.
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2013). Strategic Management: Competitiveness & Globalization (10th ed.). South-Western.