Strategies implemented in order to expand the business segment are known as diversification strategies. Operations of the firm are expanded by adding new and latest products, services, productions, stages in the existing business. This is actually termed as a way with the help of which a business can enhance it’s profits and can generate better revenues. The goal of diversification is actually to enter into the new lines of business that are entirely different from the existing ones. This is the way with the help of which a business generate high revenues. There are various kinds of diversification strategies:
1. Conglomerate diversification
2. Concentric diversification
3. Horizontal diversification
[linkunit]The first strategy is applied when there is no direct relationship between the new and the existing products or services. Whereas, the other strategy is applied when the new products or services are directly or indirectly related to the existing ones. On the other side, horizontal diversification is a strategy by which company adds new and latest products and services that are somehow linked with the company’s existing technology. The purpose of these diversification strategies is to enhance the productivity of a business and to make it the well-developed one. A company can compete with its competitors and can gain an edge over it due to this way.
[adsense1]Diversification strategies are termed as the corporate strategies that are handled by corporate sector. According to Ansoff matrix, diversification is termed as one of the risky strategy that requires careful and clear investigations. In order to be at the safer side, companies therefore try to do some tests before implementing diversifications strategies. In fact, companies do introduces various set of strategies in order to make it effective and innovative. By introducing new products through various diversification strategies, chances of getting more and more is increased thus companies can gain their desired outcomes too. This is one of the best way that is no doubt adopted by various companies in order to have a certain edge. Apart from this, the risk is also higher. Competition increases and this is the way due to which most of the companies do fail. In order to add additional value to the company’s existing value, diversification is thus termed as one of the best way with the help of which companies can gain success and can touch the high skies. Most of the organizations are trying to adopt various diversification strategies only to be the best one. By introducing latest products and services, the level of competition also rises and thus the challenge for the companies is there. Therefore, in order to overcome all the problems, companies do focus on diversification by properly investigating the processes and by doing the analysis in order to rectify any risk. No doubt, diversification strategies are now being implemented by most of the companies and the reason behind numerous organizations is diversification. Thus, it is one of the best way if you really want to grow and grow.
Robin Brooks, Marco Del Negro, Federal Reserve Bank of Atlanta (2002), "International diversification strategies", Federal Reserve Bank of Atlanta, pg 34
Michael A. Hitt, R. Duane Ireland, Robert E. Hoskisson (2009), "Strategic management: competitiveness and globalization : concepts & cases", Cengage Learning, pg 389