Businesses have opportunities to provide a narrow range of products through specialization or to offer a broader range of products through diversity. Sometimes it can be difficult to understand when it is beneficial for them to take one approach over the other. This can be determined by current revenue as well as the market itself.
If the market is saturated and future growth of sales is likely to be limited then it makes more sense to diversify your offerings into more lucrative markets. The business will need to explore these new options or they will slowly be squeezed by competition into a declining market.
The other option is to diversify and do something better than anyone else. This should occur if your business is too small to be all to everyone or if you are a large business offering something unique. For example, a patented product might lead to similar patented products that are unique and have market appeal.
It isn't always easy to know when to diversify and when to specialize. Much of it depends on the competition in the market. If your competitors cannot offer something as unique as your business and not at the same quality level then it makes sense to get better at it because you build your own market.
However, if the prospects for growth are low and your company doesn't have superior strength in one area they may need to diversify to ensure they have multiple revenue streams. Large companies invest in other areas because they have the capacity to manage multiple product lines at once and the resources to move to the top of the market through economies of scale.
No comments:
Post a Comment