| Course | MGT 494 Strategic Management |
|---|---|
| Module | Module 5 |
| Paper type | Corporate strategy analysis |
| Length | About 1,053 words, 6 pages |
| Format | APA 7 student paper |
| School | Aspen University |
| Program | Business Administration |
| Updated | October 2026 |
Free sample paper for MGT 494 Module 5
Beyond the Seed Bag? Testing Three Diversification Options for an Independent Seed Company
Student Name
Business Administration Program, Aspen University
MGT 494: Strategic Management
Instructor Name
Month Day, Year
Beyond the Seed Bag? Testing Three Diversification Options for an Independent Seed Company
Having settled how it will compete, by knowing midsize northern Corn Belt farms better than anyone, the composite Iowa seed company Turkey River now faces a question of scope. With that settled, some board members want to grow by entering new businesses. Three options have been proposed. The first is a precision agronomy service, selling field-by-field recommendations, soil testing and in-season scouting by subscription, including to farmers who buy seed elsewhere. The second is buying a farm chemical and fertilizer retailer with eight locations in northeast Iowa, offered for about $38 million. The third is buying a farm equipment dealership, offered for about $22 million. This paper evaluates the three.
Tests for Diversification
Porter (1987) studied the diversification records of large American companies and found that many acquisitions in new fields were later divested. He proposed three tests a diversification move should pass. The attractiveness test asks whether the industry chosen is structurally attractive. The cost-of-entry test asks whether the cost of entering will capitalize all future profits, leaving nothing for the entrant. The better-off test asks whether the new unit will gain competitive advantage from its link with the company, or the company from its link with the unit. He described four concepts of corporate strategy, portfolio management, restructuring, transferring skills and sharing activities, and argued that the last two create the most value in most cases.
Evidence on Diversification and Performance
Palich et al. (2000) combined decades of studies and found a curvilinear relationship: performance tended to rise as firms moved from a single business to related diversification and then to fall as diversification became broad and unrelated. Rumelt (1974) had found earlier, in a study of large American firms, that companies diversifying around a central skill or resource, which he called related-constrained, performed best. Both point toward moderate, related moves.
Applying the Tests
| Option | Attractiveness | Cost of entry | Better off |
|---|---|---|---|
| Precision agronomy service | Growing demand; fragmented competitors | Low; builds on existing agronomists and data, about $4 million over three years | Yes; strengthens seed sales and the yield database |
| Chemical and fertilizer retailer | Moderate; thin margins, heavy competition | High; $38 million price reflects full value | Partly; some shared customers, but different skills |
| Equipment dealership | Moderate; cyclical | Moderate; $22 million | No; few shared skills or activities |
Why the Board Wants to Diversify
The board's interest in new businesses has three sources. Seed sales are seasonal, concentrated in a few months, and some members want steadier revenue. Farm consolidation shrinks the customer base, and growth through new businesses seems easier than growth in seed share. And two members, from banking backgrounds, see the retailer as a solid cash-producing asset. These motives are understandable, but Porter's research suggests that diversifying to smooth earnings or to grow for its own sake rarely creates value for owners, who could diversify their own investments more cheaply.
The Agronomy Service
The agronomy service passes all three tests. Demand for field-level advice is rising as farms adopt yield monitors and face pressure to use fertilizer efficiently. Competitors are mainly retail agronomy firms selling advice as part of chemical sales and small consultants. Entry costs are modest because the company already employs agronomists and holds the yield database. And the link creates value both ways: subscribers become seed prospects, and every subscriber's yield data improves recommendations for seed customers. This is Porter's transferring skills and sharing activities in practice.
The Retailer
The chemical and fertilizer retailer would add revenue but fails the cost-of-entry test. The asking price reflects its full earnings, leaving little for the buyer, and the company has no special ability to run it better. Margins are thin, and the global seed companies' crop protection affiliates compete hard in the same channel.
The Equipment Dealership
The dealership shares customers but almost no skills or activities with seed. It fails the better-off test and would move the company toward unrelated diversification, the range where Palich and colleagues found performance tends to decline.
Building Versus Buying
The agronomy service could also be bought, since several small consulting firms operate in the region. But buying would cost more than building, because the company already has most of the needed resources, and an acquired firm's consultants might not share the company's approach to dealers. Building internally keeps costs low and the culture consistent, though it takes longer to reach scale.
Financial Outline
The service is expected to sign 400 subscribers in its first two years at about $3.50 per acre on an average of 900 acres, roughly $1.3 million a year, and to break even in year three. Its larger value lies in seed sales: if a quarter of non-customer subscribers switch some acres to Turkey River seed, the added seed margin would exceed the service's own profit.
Measures
The board will judge the move by subscriber numbers, the service's break-even date, the share of subscribers who become seed customers and seed customer retention, reviewed each quarter.
Recommendation
Turkey River should build the precision agronomy service, launching it in two counties next season and expanding over three years, and should decline both acquisitions. The service should be organized as a separate unit with its own profit goals but share agronomists, data and dealer relationships with the seed business.
Vertical Integration Considered
The retailer is also a form of forward vertical integration, moving the company closer to the farmer through another channel. Integration can make sense when a company needs control of a channel to protect its strategy. Here it does not: the company's dealers already provide the channel, and owning a chemical retailer would place the company in competition with retail agronomy firms that sell some of its seed today.
Risks
Selling advice to farmers who buy competitors' seed may create tension with dealers. Dealers will earn commissions on subscriptions, aligning their interests. The service could also distract from the core seed business; quarterly reviews will check that seed retention holds.
Conclusion
Porter's three tests and the research on diversification point the same way: Turkey River should make a narrow, related move that builds on its existing skills rather than buying businesses it cannot improve. A precision agronomy service extends the company's advantage in local data and advice, while the retailer and dealership would add size without adding value.
References
Palich, L. E., Cardinal, L. B., & Miller, C. C. (2000). Curvilinearity in the diversification-performance linkage: An examination of over three decades of research. Strategic Management Journal, 21(2), 155-174. https://doi.org/10.1002/(SICI)1097-0266(200002)21:2<155::AID-SMJ82>3.0.CO;2-2
Porter, M. E. (1987). From competitive advantage to corporate strategy. Harvard Business Review, 65(3), 43-59.
Rumelt, R. P. (1974). Strategy, structure, and economic performance. Harvard University Press.
What the MGT 494 Module 5 instructions ask for
Corporate-level strategy, deciding which businesses a company should own and how they add value together, is the focus of Module 5 in Aspen's MGT 494. Expect to weigh diversification or integration options against research and against the company's own strategy. Follow your classroom's Module 5 instructions on scope; the worked example keeps following the Iowa seed firm. Describe the options with facts such as price, size and what each would add to the existing business. Explain tests or frameworks for judging diversification. Review evidence on how diversification relates to performance. Apply the tests to each option, showing the reasoning for each judgment. Recommend a path, explaining how it adds value to the existing business and what the company will avoid.
How this MGT 494 Module 5 example is built
Three expansion options face Turkey River: a precision agronomy service selling field recommendations by subscription, the purchase of a farm chemical and fertilizer retailer with eight locations and the purchase of a farm equipment dealership. Porter's 1987 study of corporate diversification offers three tests and four ways a parent company can add value, arguing that transferring skills and sharing activities usually matter most. Palich, Cardinal and Miller's Strategic Management Journal meta-analysis found an inverted-U relationship, with moderate, related diversification outperforming both single-business and unrelated diversification. Rumelt's book found that firms diversifying around a core skill performed best. A table applies the three tests to each option. The agronomy service passes all three, the retailer fails the cost-of-entry test and the dealership fails the better-off test.
Where the marks sit in the MGT 494 Module 5 rubric
Corporate strategy papers are judged on clear options, accurate use of diversification frameworks, careful reading of evidence and a recommendation that shows how the corporate whole adds value. This example applies Porter's three tests to every option in a table. Palich, Cardinal and Miller's meta-analysis and Rumelt's findings supply evidence rather than assumption about how diversification pays. The recommendation identifies which of Porter's concepts, transferring skills and sharing activities, creates value. The paper also states what the company will not do and examines the board's motives for diversifying, which keeps corporate strategy from becoming a list of opportunities.
MGT 494 Module 5 help from the desk
Diversification papers often recommend entering an attractive industry without asking whether the company can enter it profitably or add value there. Apply all three of Porter's tests. Another weakness is treating relatedness loosely; explain specifically which skills or activities would be shared. Use evidence on diversification and performance. Consider building a new business as well as buying one. Estimate costs of entry with figures. Name the options rejected and why. Finally, connect the corporate decision to the business-level strategy, since a diversification move should strengthen, not distract from, the core. Examine the motives behind the push to diversify.
Write yours, or have the desk draft it
This paper is an original model document written by our desk, not a submitted student paper and not an official Aspen University document. Read it for the moves, then write your own to the instructions in your classroom. If you want one built to your exact prompt and rubric, the first custom sample is free and arrives in 24 to 48 hours.
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MGT 494 Module 5 questions, answered
What does MGT 494 Module 5 usually ask for?
Aspen's MGT 494 covers corporate-level strategy in this module, so evaluating diversification or integration options for a company is typical. Check your classroom prompt.
What are Porter's three tests for diversification?
The attractiveness test (is the industry structurally attractive), the cost-of-entry test (does entry cost leave room for profit) and the better-off test (will the new unit or the company gain competitive advantage).
Does diversification improve performance?
Palich, Cardinal and Miller's meta-analysis found an inverted-U pattern: moderate, related diversification tended to outperform both single-business firms and highly diversified firms.
Where can I find a free MGT 494 Module 5 sample paper?
The example above tests three diversification options for an independent seed company and recommends building a precision agronomy service.
What is related diversification?
Expanding into businesses that share skills, resources or activities with the existing business, so the combination adds value.