When a company diversifies by acquiring a different company in an entirely unrelated field or new industry, it’s known as conglomerate diversification. Disney is the world's largest media conglomerate. Under the direction of the former CEO Bob Iger, the Walt Disney Company grew by acquiring other large media companies, including Marvel, 20th Century Fox, Pixar, and Lucasfilm. - There are several potential advantages to implementing a diversification strategy.
- Some of the most important benefits are as follows:
1 - Flexibility:
Companies can become more flexible by pursuing a diversification strategy. With more products to offer—and increased competencies—the risk of shortfalls in any single area is offset by potential rewards in other markets. 2 - Growth:
Diversification can increase market share and profit margins. Whether a small company takes the next step into a bigger market or a major brand wants to appease shareholders, diversification can be the right move. 3 - Survival:
Business can be challenging, and sometimes, the future of an enterprise is on the line. You can pivot your business and avoid collapse through a successful diversification strategy. Drawbacks of Diversification - There is a fair degree of risk in embarking on a diversification strategy. Diversification is the most complex type of growth strategy, and some of the pitfalls might include:
1 - Lack of expertise:
Diversifying requires an expanded skill set, especially when a company diversifies its business in a new industry. A company expanding into a new market must know how to reach new customers. Companies need to find capable people with experience through strategic partnerships to have a successful diversification strategy. 2 - Innovation challenges:
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