Dependence on only a few products or services risks the long term performance of the organisation, particularly in the industries where innovation is critical for growth. Small changes in the environmental conditions, regulations, demography, trends and customer's choices or invention of new products can bring it into troubled waters. This makes it necessary that the organisation utilise their expertise to develop different products and services which reduces their reliance on few product/service lines. This also helps to enter into new markets, which can also drive the growth of its existing services.
Diversification helps to reduce risk for the company and helps in its further growth. However, it is difficult for an organisation to move its focus from existing services to new ones. If not done properly, it may affect existing services and products adversely.
Expansion into new domains also requires additional infrastructure and capital to move into business. Companies may share part of the available capacity from present business as well as affect its liquidity position. Thus, its effects on the present business must be carefully examined and capacity expansion phases needs to be well organised.
Our diversification program will assess the new market potential, develop a risk vs benefit analysis and score a success index based on established business protocols.
What are the benefits of diversification?
Increased sales and revenue
One of the most appealing benefits of diversification is the increase in sales and revenue a new market can provide. This is especially beneficial if a business is strong in a certain marketplace and is finding it difficult to improve profitability and acquire new customers. A new product or service can bring with it a new opportunity for growth.
If a small business is reliant on one or two large clients for their revenue, it leaves them in a vulnerable position should one of these clients leave. As diversification has the potential to tap into a larger customer base, even without significant growth, it can provide an opportunity to cushion the blow from losing a key customer.
What are the risks of diversification?
Keep in mind the operational requirements needed to diversify. The need for short-term capital, as well as a multitasking workforce, might leave you spread too thin. Consider the effects it may have on your team, production, finances and marketing and whether or not it is worth the strain it might put on your other offerings.
Even if you are in a strong position to diversify, it might not be worth diluting your brand or confusing your customers by introducing a range of new products or offerings. If you no longer specialise in a certain product or service, it might bring doubt to your position as a leader in your particular field.
Graphite Business Management Growth Programme assesses all the risks and benefits, puts plans in place to minimise failure and audits results and future improvements if required.