Over the years, there has been vast advancement in the business sector. The growing population rapidly accelerates business growth. Besides, new companies are evolving with innovative commodities, resulting in high competition. Therefore, as an already existing entity, it is significant to embrace an effective market growth strategy to keep the company on those by implementing a diversification approach.
Diversification is an approach utilized to expand market shares by acquiring or launching new products. The strategy is essential since it provides three practical ways to choose from it. Firstly, concentric diversification is a growth strategy that aims at establishing an acquired or new product related to an existing product in the company (Jason, 2021). This would enable the company to utilize the existing expertise and employ resources when developing a new commodity. Similarly, concentric diversification would strengthen customer loyalty and leverage brand awareness since the new item targets the previously spotted market.
Besides, the company can also embrace horizontal diversification. Horizontal diversity typically involves introducing a new market segment by developing a new product. However, the approach targets the already existing customer base since the new products are closely associated with the previous commodity offered (Jason, 2021). For instance: a company selling detergents can venture into supplying washing machines. On the contrary, there is conglomerate diversification. Whereby the company can synthesize unrelated products to build brand awareness
Despite that, diversification reduces risk factors. When a company introduces new products to the market, it will limit reliance on a single product or a single market; hence, it would benefit from different consumers and markets. Additionally, it is straightforward to tap into more markets (Oladimeji & Udosen, 2019). Having a range of products means having a broad market to sell. More demand increases overall turnover and distribution, which would bring in vast profits and thus diversification is vital.
References
Jason G D. (2021). Diversification business strategy – Explained. The Business Professor, LLC. https://thebusinessprofessor.com/en_US/business-management-amp-operations-strategy-entrepreneurship-amp-innovation/diversification-business-strategy
Oladimeji, M. S., & Udosen, I. (2019). The effect of diversification strategy on organizational performance. Journal of Competitiveness, 11(4), 120-131. https://doi.org/10.7441/joc.2019.04.08
