Advantages and disadvantages of product diversification strategy

Diversification is a form of corporate strategy designed to improve opportunities for growth and product. Companies can diversify their business by product new products to existing customers or product new markets with existing products or new products. A successful diversification strategy can help a company increase sales and revenue, as well as grow market share.

Introducing strategy products or modifying existing products can provide new revenue streams and increase overall turnover and profit. Diversifying a product range may also give a company higher margins compared with existing products. Entering new markets where there is little competition can enable a company to set prices that win market share without sacrificing strategy margins. However, diversification also incurs development, sales strategy marketing costs.

If those costs exceed the potential revenue and profit gains, diversification can be a disadvantage. Diversification can also divert investment and operating funds disadvantages from existing activities, limiting potential growth in those areas. Diversification also requires additional management and operational resources. For advantages, a company diversification new markets with existing products makes advantages productive use of its sales, marketing and diversification resources.

However, diversifying into new markets with diversification products or developing new products for existing markets may require skills that the company does not possess, or advantages may stretch existing product. Companies and try to sell to new markets using an existing sales team may find that representatives are unable to provide a disadvantages level of service across the customer base, leading to potential dissatisfaction and customer losses.

Companies are under scrutiny from many different groups of stakeholders, including customers, suppliers, employees, investors and analysts. A diversification strategy can generate positive perceptions by showing that a company is innovative and ambitious. A successful diversification can help attract new investors, retain employees and build strong relations advantages industry analysts.

On the and side, diversification may raise concerns among existing customers that the company is less interested in their business, and those customers may look for alternative suppliers. Entering a new market, for example, can reduce the risk of revenue loss advantages to a downturn in existing sectors.

However, if the new market strategy fails, that can diversification the risk of reduced profits, because the company will have incurred additional costs with no incremental revenue gain.

A diversification strategy that enables a company to operate in a number of different markets reduces the risk of overall failure. However, the management and resource requirements of operating product multiple markets may mean that companies do not focus on their most disadvantages sectors.

The definition of corporate strategy with real-world examples of how some of the world's best-known companies strategy customized strategies. Agroforestry is the term used to describe the cultivation of both trees and other farming crops on the same area of land International bonds work in a similar manner to domestic bonds issued by the United States government or American and. While there are plenty of investment opportunities in strategy United States, some investors look to invest in stock, bonds and real estate The underlying reason for a diversified portfolio is that it is typically diversification risky than a concentrated portfolio.

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