Tag : Product Diversification

Product diversification is the process of expanding business opportunities through additional market potential of an existing product. Diversification may be achieved by entering into additional markets and/or pricing strategies. Often the product may be improved, altered or changed, or new marketing activities are developed. The planning process includes market research, product adaptation analysis and legal review.

It may refer to a new company, a new technology, a new market, or a new product. So, product diversification means addition of a new product (not the variations in the qualities of the same product) to the existing product line or mix.

It is important to note that conscious and deliberate product diversification, whether in the form of seeking new applications for the productive capacity and technological know-how of the firm on the one hand, or alternatively of exploiting a firm’s knowledge of a market which nay extend beyond its pro­duct range, is a matter of high-level management decision.

For example, manufacture and sale of sewing machines in addition to electric fans pro­duced by a firm is a case of product diversification.

Product diversification is a strategy employed by a company to increase profitability and achieve higher sales volume from new products. Diversification can occur at the business level or at the corporate level.

Business-level product diversification – Expanding into a new segment of an industry that the company is already operating in.

Corporate-level product diversification – Expanding into a new industry that is beyond the scope of the company’s current business unit.

The objectives of Product Diversification is to gain stability in the firm’s earnings and organisation,  \to attain efficiency in the utilisation of a firm’s resources — human, physical and financial, to increase sales of basic products and exploit the value of an established trade mark, to increase the profits by offering different types of products, and to meet the demands and convenience of the diversified retailers.

In addition to achieving higher profitability, there are several reasons for a company to diversify. Diversification mitigates risks in the event of an industry downturn. It allows for more variety and options for products and services. If done correctly, diversification provides a tremendous boost to brand image and company profitability. Diversification can be used as a defense. By diversifying products or services, a company can protect itself from competing companies. In the case of a cash cow in a slow-growing market, diversification allows the company to make use of surplus cash flows.

 


Product Diversification |

Many countries across Europe and other continents are cautiously lifting their lockdowns to revive their dwindling economies. Agile companies are being proactive and adapting their business strategy to recover from the massive losses incurred during this pandemic. Most companies are continuing with remote work environments and securing their supply chains in this post lockdown period. […]