Pick your strategy. Leverage your core competence by diversifying into related fields, and risk straying from that core skill area, or stay strictly doing what you are best at and risk low growth? Well it depends, doesn’t it? Honda’s core competence is reputedly in engines, and whilst they have repeatedly struck out in new areas there’s always an engine attached. But isn’t that a stretch? Shouldn’t they stick with just the engines? Why bother with a complete lawnmower, or bike, or car or – more recently – executive jet? Why risk that enormous leap from building great engines to building the whole contraption? Well the finished good garners a better overall price, for starters. But it is a stretch, isn’t it? From a lawnmower engine to a jet!

Still, it seems to work. Perhaps it’s all in the execution and Honda’s core competence is actually in making complicated mechanical things work. Wharton has an interesting article on this topic, focusing on Amazon, Google and Yahoo and their varying diversification strategies. A good read.