The world is changing at the speed of lightning, and you need to diversify. Therefore, certain innovations can make your products and services obsolete overnight. Diversification or specialization, are the choices of strategies available to companies. Both systems have their advantages, however, you have to find the right one for your company.
Define your strategy according to the demands of your targets. As well as the offers of your competitors, your place in the market as well as the new products that have inspired you. You should also consider investing, whether that is in other businesses or stocks and shares. You could look to diversify and into playing with stocks.
Diversification is defined as the creation of a new product in a new market. For this, the company has the choice between two options: vertical integration and horizontal integration. You can then choose upstream integration or downstream integration.
The advantage of this technique is the reduction in costs. At the same time, you could diversify your offerings and services. Horizontal integration consists of finding new products that are not identical to current products. But that is complementary (the technology or the target is the same).
The benefits of diversification
A well-conducted diversification can save a company on the verge of bankruptcy. It can also offer another dimension capable of generating significant turnover. Among the advantages of diversification, we can highlight the following:
- Reduction and diversification of operating risks
- Seizing real opportunities (offensive strategy)
- Compensation for a decline in the profitability of its traditional activity (defensive strategy)
- The start of a retraining
- The reduction of its dependence on a market, a supplier, a distributor, etc.
- Optimizing its value and supply chain
- The use of its skills, technology, and resources, by building on synergies
- Optimizing costs and achieving economies of scale
An opportunity for business
If many companies, both very small and small businesses as well as large groups, opt for this strategy, it is because it pays a lot. First, it allows you to meet all of the customer’s needs, which ensures their loyalty to your business. Then, the success of the product will bring you a consequent profit. By diversifying your products as well, you ensure the survival of your business. With diverse and varied products, the losses associated with low-demand products are offset. This is accomplished by the profits of products that reach a large market share.
If many companies, VSEs, SMEs, large companies, opt for diversification, it is because it is a source of growth. It makes it possible to meet other customer needs. Therefore it can consolidate the links that already exist. It will also be able to consolidate its customer loyalty. This ensures their loyalty to your business now and in the future. It also makes your business sustainable.
This is because the markets are fast-moving but also innovations and evolutions must anticipate the future. After all, every business must look to the future. Technology is changing the way in which we work. Therefore, it’s important to focus on what is going to serve you well.