Essay: Business Diversification

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  • Subject area(s): Business essays
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  • Published on: January 7, 2019
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  • Number of pages: 2
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Mouncey (2016) stated that there is currently a shortage of data analysis, and that if exploited it could be used to create opportunities for companies, influencing positively the long-term strategy of the business. Purple4 is a telecommunications company that wants to expand by venturing into a new business, providing data on their customers. The objective of this analysis is to find a beneficial and profitable business opportunity with a thorough analysis of the variables presented.

Business Diversification is a common thing among companies that are trying to grow in categories beyond their core business (McKinsey & Company, 2015) and it is not a new strategy for telecommunications companies. Orange, a French telecom giant, has recently ventured into banking in 2017 (REUTERS, 2017) and Virgin, initially a record shop, has ventured into telecommunications, transportation and banking amongst others (Virgin, 2018)

Through an initial overview of the data, several options were proposed in order to make a final recommendation; it was first proposed to find the most valuable customers, based on monetary and demographic variables, and create a new financial product. This product would be used to provide customers who did not own a house a bank loan to become homeowners. The second option was a Programmatic Advertising software. Gathering all the behavioural and demographic data from the customers, clusters of clients who shared similarities would be made to create Purple4’s own software that created lookalike audiences in order to provide advertisers specific audiences that matched their products and their targeting strategy. The latter proposal, even if interesting, was disregarded due to the lack of behavioural data and a complete understanding of the customer’s data usage. Therefore, the aim of this study will be to find the most profitable customers, in order to offer a bank loan specifically to be used in the housing market.

Homeownership in the United Kingdom has been declining in the past years, accompanied by a fall in the proportion of young households who were owners (Meen, 2012), it was also argued by Willets (2010) that baby-boomers have profited to the disadvantage of younger generations, making it harder for millennials to own a home. A solid rise in mortgage debt has become global issue, but the UK in particular shows an increased debt to GDP ratio only under the US, Denmark, The Netherlands and Iceland (Meen, 2012).

However, UK homeowners are benefiting since property prices have been rising, enabling them to trade up, purchase second homes or remortgaging (Meen, 2012). In 2007, 50 percent of gross income from the housing market, came from remortgage or property buying from homeowners (Meen, 2012).

Therefore, it is clear that there is an important opportunity in the financial sector, for customers who are willing to begin their journey as first-time homeowners (millennials) and also for customers who already own a home, who are willing to trade up or buy a second property. It is important to mention that, even though necessary for a business decision, this study will not contain any financial predictions or recommendations on the housing market due to the specificity of the field.

III Methodology: 1,000

As mentioned above, this study will focus on the finding and clustering of valuable clients who are most eligible and likely to use a new Bank Loan offered by Purple4. The data set consists of 4,865 customers and 123 variables, the sample includes nominal, continuous and ordinal data.

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