MARKET EXPANSION DIVERSIFICATION STRATEGY

When companies reach a certain point in their growth, planning and implementing a growth strategy is the next line of thought. Diversification strategy is one of the five (5) expansion strategies we talked about in our previous post.

Diversification strategy: First understand that companies diversify to achieve greater success and a diversification strategy allows companies and businesses to look at other markets they could get into or new products they could introduce to increase their reach and profits.

When a company expands its reach and appeal, businesses are able to explore new avenues for sales, and in turn, have the potential to vastly increase their profits.

Other reasons for companies using a Diversification Strategy

Apart from wanting to achieving higher profitability, companies choose to diversify for a variation of other reasons.

• Diversification can be used by a company to minimize the risk of an industry downturn.
• it can boost brand image.
• it can be used to protect a company from strong competition.

Types of Diversification:

• Horizontal diversification
• Concentric diversification
• Conglomerate diversification
• Vertical diversification

Diversification strategy is not without its disadvantages, it is the dodgiest but also the most complex.

Diversification strategy risks:

• When businesses diversify, they are entering into a new market and with a lack of experience within the new market, the businesses put themselves in a position of great uncertainty.
• Also, diversification most times needs substantial expansion of human and financial resources and this can sometimes have a damaging effect on the distribution of resources in the core industries.

A diversification strategy can give you strong results in terms of reach and revenue, but understand that it comes with some element of risk. It is always best to consider diversification once your current product or market has exhausted its opportunities for further growth. With proper planning, customer analysis needs, a high sense of current marketplace trends, and a strong team of experienced professionals, a well-thought-out diversification strategy can be highly efficient to help your business grow and evolve.

We can help you diversify successfully into your new market:

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