Case Scenario 1: Syco Inc. (SI)

question 5

Essay

Case Scenario 1: Syco Inc. (SI).
Syco, Inc. (SI)was founded the late 1800s and grew through acquisition 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 Walmart 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.
-(Refer to Case Scenario 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?

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