Lecturer: M.T.Doniyorova Plans for the lecture - What is a Diversification Strategy?
- Reasons for Diversification Strategy
- Methods of Diversification
- Benefits of Diversification Strategy
- Drawbacks of Diversification Strategy
Introduction - Diversification can be a valuable strategy for profit and growth. A company can expand its products or services to gain an edge on the competition and a headstart on inevitable changes in the marketplace.
What is a Diversification Strategy? - A diversification strategy is a corporate strategy to increase growth by changing or expanding products a company manufactures or offers for sale. Companies might pursue a diversification strategy to get an edge on competitors, a process known as offensive diversification, or a business might embark on a defensive diversification after facing significant pressure to change.
What is a Diversification Strategy? - Diversification is one of four corporate growth strategies first codified by Igor Ansoff, a mathematician and business manager active in the 1950s.
- Ansoff is known for developing the Ansoff Matrix, which charted out the four major growth strategies:
- market penetration,
- market development,
- product development, and
- diversification.
- A company might implement a diversification strategy for several reasons, including to:
1 - Beat competition:
A company might feel that the best way to gain a competitive advantage is to diversify. By expanding the portfolio of products or services, companies can offer something their competitors cannot. 2 - Seek profit:
If successful, a diversification effort can significantly increase business growth and, by extension, its bottom line.
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