Product diversification is one of the most prominent strategies that help in the growth of the business significantly, so successful leaders know that if they want their business to grow and prosper in the long term, they will not be able to stick to the same old way of working, as they must find ways to reach customers Or new consumers and thus increase the profits that they always aspire to achieve, so one of the strategies to achieve this is diversification, and in this article we will show you everything you need to know about product diversification and the best product diversification strategies, and how successful diversification is.
What is Product Diversification?
Product diversification is a growth strategy that involves adding digital products, services, and markets to your company’s core business.
Business diversification can also mean expansion through new production lines or services, and you can use this strategy to take advantage of momentum in a new market, or to reduce the risk of a core market downturn.
There are three types of product diversification strategies, which are as follows:
1. Concentric diversification strategy
Concentric diversification involves adding similar products or services to an existing business
2. Horizontal diversification strategy
Horizontal diversification involves offering new and unrelated products or services to existing consumers.
3. Conglomerate diversification strategy
It involves adding new products or services that are largely unrelated and without any technological or commercial similarities. And you can manage your products through e-commerce services in diggipacks .
What are the most risky product diversification strategies?
After we have presented the three strategies for product diversification, we can say that among those three types of diversification techniques, conglomerate diversification is the most risky strategy.
Conglomerate diversification requires a company to enter a new market and sell products online or services to a new consumer base.
This means that the company incurs higher research and development costs and advertising costs; in addition, the probability of failure is much greater in a conglomerate diversification strategy.
Risks in Product Diversification
The process of product diversification involves huge risks to the company or facility that applies it, because there is a possibility of increasing costs for it or not succeeding, and thus incurring additional costs.
Therefore, it is advisable to use product diversification strategies in the event that the market of that company turns into a stagnant market with slow opportunities or almost preparing for future growth.
Then, it is preferable to test the extent of the audience’s attractiveness to the products before starting the application of product diversification,
In addition to studying the costs so that the cost of entry does not eliminate the expected profits.
Product Diversification vs. Market Diversification
The alternative to diversifying your product is to diversify your markets, and that means attracting new customers using an existing product or format.
Companies with successful high-end products may offer a low-to-mid-range option to economic buyers to attract a new market.
This may not provide the same profit potential as high-end solutions, but it does provide access to a new market and higher sales volume.
Examples of Successful Diversification
After we talked about product diversification and its most prominent strategies as well as its weaknesses, there are a number of successful models in applying and using diversification strategies.
And the following is one of the most prominent successful models in product diversification:
1. Walt Disney
The Walt Disney Company has successfully implemented diversification strategies, diversifying its business, from cartoon business, to owning huge, popular theme parks.
It has also succeeded in creating brands, airlines, resorts, TV broadcasts and leisure activities that are among the most popular forms of entertainment today.
2. General Electric
We cannot talk about successful diversification models, nor do we mention General Electric, as it is one of the most successful companies in diversification, as it initially merged with two electric companies,
Then, it started working in a large number of fields, such as aviation, power cables, oil and gas, renewable energy, as well as transportation and healthcare.