Learn the value of diversification strategies for companies and which ones you can implement in yours
Posted: Sun Dec 15, 2024 8:48 am
Has your company's growth stagnated? Learning about business diversification strategies will help you expand, offer new products and conquer new markets.
The COVID-19 crisis put the operation of many businesses in check, especially those that had not started or consolidated their digital transformation process .
In fact, after analyzing more than 120,000 companies in more than 60 countries, the World Bank concluded that sales fell by an average of 27% between October 2020 and January 2021. In this context, diversification strategies are crucial to ensure the economic sustainability of companies in the short and medium term.
Even if your company was not affected by the pandemic, at benin email list 136028 contact leads some point you will have to implement a growth strategy to go beyond the boundaries of your core segment and venture into new market niches .
If you've come this far, it's because you're interested in knowing what market diversification is, right? In this article, we'll explain the 4 diversification strategies that will promote business growth, their advantages, risks, and the role of Marketing in their planning. Without further ado, let's get started!
What is business or market diversification?
Business diversification, also known as market diversification, is a strategy that seeks to expand a company's potential market by creating new products or services to expand into new markets .
Diversification is one of the four main growth strategies of the Ansoff matrix , which consists of developing products or services to meet new consumer profiles.
In simple terms, it is about not putting all your eggs in one basket in order to minimize risk and increase business revenue.
In a VUCA environment – volatile, uncertain, complex and ambiguous – deepened by the health crisis, companies are just taking the first steps in productive and financial recovery from the “pandemic wounds”.
This is where diversification strategies facilitate this recovery, as they help companies keep up with new market conditions. We are talking about reinventing yourself or disappearing!
4 types of diversification strategies
Depending on your business objective, you can choose one of the 4 types of business diversification that exist. Below, we explain them in detail.
1. Related or horizontal diversification strategy
The easiest way to penetrate new markets is through related or horizontal diversification. This occurs when a company launches a product or service linked to its main activity.
The particularity of this strategy is that there must be some compatibility between the new and old products . For example, it is common to use the same resources, distribution channels , technologies, machinery, processes or knowledge to take advantage of synergies between the different products.
A success story is PepsiCo . In 1931 they launched Pepsi, the iconic rival of Coca Cola. However, in 1965 they began a horizontal diversification strategy when the company acquired Frito-Lay. With this move, PepsiCo added to its catalogue different packaged snacks that complement the consumption of the soft drink.
The COVID-19 crisis put the operation of many businesses in check, especially those that had not started or consolidated their digital transformation process .
In fact, after analyzing more than 120,000 companies in more than 60 countries, the World Bank concluded that sales fell by an average of 27% between October 2020 and January 2021. In this context, diversification strategies are crucial to ensure the economic sustainability of companies in the short and medium term.
Even if your company was not affected by the pandemic, at benin email list 136028 contact leads some point you will have to implement a growth strategy to go beyond the boundaries of your core segment and venture into new market niches .
If you've come this far, it's because you're interested in knowing what market diversification is, right? In this article, we'll explain the 4 diversification strategies that will promote business growth, their advantages, risks, and the role of Marketing in their planning. Without further ado, let's get started!
What is business or market diversification?
Business diversification, also known as market diversification, is a strategy that seeks to expand a company's potential market by creating new products or services to expand into new markets .
Diversification is one of the four main growth strategies of the Ansoff matrix , which consists of developing products or services to meet new consumer profiles.
In simple terms, it is about not putting all your eggs in one basket in order to minimize risk and increase business revenue.
In a VUCA environment – volatile, uncertain, complex and ambiguous – deepened by the health crisis, companies are just taking the first steps in productive and financial recovery from the “pandemic wounds”.
This is where diversification strategies facilitate this recovery, as they help companies keep up with new market conditions. We are talking about reinventing yourself or disappearing!
4 types of diversification strategies
Depending on your business objective, you can choose one of the 4 types of business diversification that exist. Below, we explain them in detail.
1. Related or horizontal diversification strategy
The easiest way to penetrate new markets is through related or horizontal diversification. This occurs when a company launches a product or service linked to its main activity.
The particularity of this strategy is that there must be some compatibility between the new and old products . For example, it is common to use the same resources, distribution channels , technologies, machinery, processes or knowledge to take advantage of synergies between the different products.
A success story is PepsiCo . In 1931 they launched Pepsi, the iconic rival of Coca Cola. However, in 1965 they began a horizontal diversification strategy when the company acquired Frito-Lay. With this move, PepsiCo added to its catalogue different packaged snacks that complement the consumption of the soft drink.