Should a successful business work to become really good at what it already does, or should it expand its sphere of influence and try to take over something else? Here at the Fool, we believe that diversification can be a huge strength for a business. However, it largely depends on the situation. If a company has made a name for itself selling apples and wants to branch out into selling oranges, it needs to make sure it's got the financial resources to do both.
Streaming music company Spotify seems believe in the power of diversification: It recently announced that it would be expanding its horizons into the realm of video. It seems like a surprising move, particularly because Netflix (NASDAQ:NFLX) has set the bar pretty high when it comes to streaming video. But could the barrier to entry be lower than it looks for this market?
Fool contributor Caroline Bennett takes a closer look at the ins and outs of this situation. Is this the best course of action for Spotify? Should Netflix be worried? And even though it's a private company, can we still find out whether the streaming music service has the financial means to make this happen?
Fool contributor Caroline Bennett has no position in any stocks mentioned. The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.