Page 2: External and internal expansion
Dixons’ external acquisition strategy led to Currys, Mastercare and PC World becoming part of the Dixons Group. As a method of development, acquisition makes sense, particularly in markets which are relatively mature. This strategy enabled Dixons to take over a large company which already existed in the electrical marketplace (Currys) and also acquire a developing organisation with a bright future (PC World). Mastercare was part of Currys when it was acquired by Dixons.
A key benefit of acquiring Currys was that Mastercare would help Dixons to develop a lead in the area of service. PC World was not a major competitor, but Dixons recognised that it had uncovered a formula which could provide a successful platform for further development in the field of computer sales. Each of these organisations, except for Mastercare, was an example of horizontal integration.
They possessed similar products and services which complemented the existing Dixons portfolio, consequently helping to increase market share. The benefits of these acquisitions were:
- the development of the business across a horizontal plane. This provided growth and enabled it to stay close to its expertise in electronic and electrical retailing
- the opportunity to take over a competitor and increase its market share
- the fusion of resources across the business which allowed a larger Dixons Group to gain from economies of scale and improve its commercial efficiency
- synergy - the synergy equation 2+2 = 5 signifies that a portfolio of businesses is more valuable than each as a stand-alone entity, because of the influence of the group as a whole in areas such as management, channels of distribution, customer care and service.
The internal development strategy adopted by Dixons was particularly effective for developing products and services where high growth is most likely. For Dixons this led to the development of The Link, @jakarta and Freeserve. Dixons used these internal developments to:
- segment its markets
- increase its market penetration
- take advantage of further business opportunities and improve its overall competitive advantage
- move into related areas which complemented existing markets.