- Diversification
- Diversification strategy
- Diversification Strategies: Related and Unrelated Diversification
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Diversification
This strategy may entail new technology, skills and a revised marketing approach. Concentric diversification : Producing new products or services which are in line with existing products or services and will appeal to new customers. You might be able to make use of existing technology and resources to implement this strategy. Conglomerate diversification: Generating new products or services that are entirely different or unrelated to your current products or services.
Growing your business with this strategy is considered risky as you are entering a new market. It may be possible for you to control more than one stage of the supply chain. Diversification comes with its own set of risks, costs and additional resources. If these demands exceed your potential revenue and profit gains, this growth option could be too risky for your business.
The fact remains; even if the success of your business depends on diversification, timing is essentially everything. Understanding the market that your business is operating in is essential to the prosperity of your diversification strategy.
Taking into account the financial and human resources required to carry out diversification is equally as important. When executives decided to diversify into the automobile industry, Honda was successful in part because it leveraged this ability within its new business. Honda also applied its engine-building skills in the all-terrain vehicle, lawn mower, and boat motor industries.
Earn credit, add your own example! Sometimes the benefits of related diversification that executives hope to enjoy are never achieved. For example, both soft drinks and cigarettes are products that consumers do not need. Companies must convince consumers to buy these products through marketing activities such as branding and advertising. Thus, on the surface, the acquisition of 7Up by Philip Morris seemed to offer the potential for Philip Morris to take its existing marketing skills and apply them within a new industry.
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Unfortunately, the possible benefits to 7Up never materialized. Why would a soft-drink company buy a movie studio?
Diversification strategy
Lighter firm Zippo is currently trying to avoid this scenario. This brand has fueled eighty years of success for the firm. But the future of the lighter business is bleak. This downward trend is likely to continue as smoking becomes less and less attractive in many countries. To save their company, Zippo executives want to diversify. As of March , Zippo was examining a wide variety of markets where their brand could be leveraged, including watches, clothing, wallets, pens, liquor flasks, outdoor hand warmers, playing cards, gas grills, and cologne.
Diversification Strategies: Related and Unrelated Diversification
It was able to master logistics and deliver standardized hardware at prices and speeds no one else could match. So Dell was winning. And today? As for computers, Dell managed to hold on to its lead over Acer, but just barely, with However, no company in the fast-changing hardware and software sectors can take its market share for granted. The challenge was made especially clear in the recent jostling in the notebook computer market.
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Dell is no Apple, says Netessine. What it has done is deliver a basic product that someone else has invented but get it to consumers much more efficiently. To be an Apple requires a little bit more. It has been innovating its whole life. Dell is betting on the growing interest among its corporate customers in cloud computing services — Internet-based computing that lets companies access resources, such as software and storage, which providers like Dell host remotely on their behalf.
For some companies, Netessine suggests that servicization can be a big shift.
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Several recent acquisitions move Dell further in the servicization direction.