product diversification is a strategy employed by a company to increase profitabilityprofitability ratiosprofitability ratios are financial metrics used by analysts and investors to measure and evaluate the ability of a company to generate income (profit) relative to revenue, balance sheet assets, operating costs, and shareholders’ equity during a specific period of time. diversification can occur at the business level or at the corporate levelcorporate structurecorporate structure refers to the organization of different departments or business units within a company. business-level product diversification – expanding into a new segment of an industry that the company is already operating in. for example, when a computer company that primarily produces desktop computers starts manufacturing laptops, it is pursuing a concentric diversification strategy. for example, a notebook manufacturer that enters the pen market is pursuing a horizontal diversification strategy. for example, if a computer company decides to produce notebooks, the company is pursuing a conglomerate diversification strategy.
conglomerate diversification requires the company to enter a new market and sell products or services to a new consumer base. additionally, the probability of failure is much greater in a conglomerate diversification strategy. therefore, companies should only pursue a diversification strategy when their current market demonstrates slow or stagnant future opportunities for growth. general electric commonly comes into discussions when talking about successful diversification stories. walt disney company successfully diversified from its core animation business to theme parks, cruise lines, resorts, tv broadcasting, live entertainment, and more. cfi’s mission is to empower anyone to become a great financial analyst through our financial modeling & valuation analyst programfmva® certificationjoin 350,600+ students who work for companies like amazon, j.p. morgan, and ferrari .
take the time to understand how to effectively plan, organize and execute a new product diversification strategy. you can take a defensive approach with the objective to protect your business if, for example, demand drops for your products or you face strong competition. alternatively, you can take an offensive approach where you see a strong market opportunity but can’t take advantage of it with your existing products. you can modify your existing products so that the new version appeals to a different group of customers. another approach is to add a new product to your range, aimed at a new group of customers. analyze whether you have the resources to develop new products or modify existing ones.
set a budget for the diversification program to cover development and marketing costs. consider the supply chain implications of your new products. does your team have the product and market knowledge to achieve your sales targets? provided the costs of developing and marketing the new product allow you to earn a profit, this is an opportunity to pursue. risk increases if the new product might take sales away from your existing products or if the cost of market entry is very high. carry out a small-scale market test to evaluate the potential of your strategy. analyze the cost of taking the product to market so you can prepare an accurate budget for launching the new product.
product diversification is a strategy employed by a company to increase profitability and achieve higher sales volume tip. a product diversification strategy considers existing products for new pricing or expands new products into markets to diversification is a corporate strategy to enter into a new products or product lines , new services or new markets,, . product diversification is the practice of expanding the original market for a product. this strategy is used to increase the sales associated with an existing product line, which is especially useful for a business that has been experiencing stagnant or declining sales. diversification is a corporate strategy to enter into a new products or product lines, new services or new markets, involving substantially different skills, technology and knowledge.
suddenly, senior managers must synthesize mountains of data—including internal-rate-of-return calculations, market 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. product diversification is a business strategy which involves producing and selling a new line of products or,
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