Diversify? Divest? Let’s call the whole thing off
Well, McDonald’s has decided to divest Chipotle. I at one point had been quite critical of McD’s purchase of what has become one of my all-time favorite restaurants. That is, until the (then) Marketing Director for the McDonald’s New York Metro region told me that the only reason I had even been able to eat at one was because of the infusion of their capital and thus rapid expansion of the chain. This is echoed in the news story:
“Since we made our initial investment in 1998, Chipotle has grown from 16 restaurants in the Denver area to a strong and popular restaurant concept with more than 500 locations throughout the U.S.,” McDonald’s Chief Executive Jim Skinner said in a statement.
“However, attracting more customers to McDonald’s remains our greatest opportunity for long-term profitable growth,” he said.
I, for one, am pleased to see McDonald’s has come out of their slump, and that they are focusing on their core business. This does, of course, bring us back to a fairly common business theme, that we talk about often in class. Firms “diversify” and then they divest… diversify.. divest… Some even step outside the realm of what would seem to make sense. Some diversifications make sense. GMAC not only helped finance cars, but has become quite a strong entity in financing in general–and has helped float GM in these tough times.
Others make far less sense. For instance, remember Phillip Morris buying Nabisco, and Planters Peanuts? So a tobacco company sells food? That was a mistake that if I remember correctly was identified, and divested… *smile*
I look forward to hearing/reading your examples of firms that have gone through the diversify/divest cycle.
for being late, i can’t think if this is exactly an example or not. The first invest, divest I can think of is Pixar and Disney. but in my sleepless state I can be wrong. 🙂
K-mart bought Sears in November 2004…So now we can shop for Craftsmen tools and Martha Stewart. Don’t forget Landsend and Joe Boxer. So Christmas 2005, there will be one stop shopping – Grandma presents and Husband presents all in one spot..don’t for get the Joe Boxer wear for the teenager!! Great – um, sorry but I haven’t seen the merge yet – where is the Landsend at K-mart??