Question
Are you against of for Diversification strategy can do more harm than good to a company I asked here and one of the tutor answer
Are you against of for "Diversification strategy can do more harm than good to a company"
I asked here and one of the tutor answer that:
The diversification strategy is risky for the company. It would be best if readiness and a thorough analysis of current and future events. Depending on how well the business could handle a devised plan. Businesses who usually shift to this strategy have already solidified their roots in the business world. Those who have already marked their names in the market. Since these businesses already know the pros and cons of market and product penetration, they already know what will be good and bad for their respective businesses.
A new product means a new portfolio.
It depends on product placement and market acceptance. Thus, the business will start from zero when it comes to market testing for the new product.
A new market means a new avenue.
The business is now considering a different approach with its potential market. Therefore studying consumer behavior, culture, profile, and many more is most likely to happen. It is essential for the product or service to not flop in that market. Because we are now talking about sales here, the new market will now tell whether they will go after the new product.
Diversification has more good than harm in a company because of its advantages, which leads to the company's upward growth because of increased proceeds, entry to new markets, and diversified risk.
New ideas mean new opportunities.
These ideas will provide the basis for the new product and market. The management will conduct studies based on these and tell from a managerial perspective the opportunities, strengths, weaknesses, and threats these ideas offer.
The new strategy means additional costs.
These strategies will talk about the new marketing and business plan, heightened advertising and financial needs, enhanced product life cycle, and the likes. Thus we are talking about additional costing and expenses, in general, when opting for the diversification strategy.
Diversification strategy is a company's activities to enter new markets that it has not operated in. Diversification strategies are of various types ranging from the conglomerate, horizontal, vertical, and concentric.
The main aim of firms to diversify their risk is to diversify their risk, thus spreading it. When the risk is spread, there is enhanced company growth.
I am against the aspect that diversification strategy can do more harm than good to a company because of the advantages of new markets, increased revenues, increased market share, reduced risks, and overall growth.
*** My question is, it means that diversification strategy is not recommended for small business? It is only recommended if you have established business like those conglomerate. so the answer to the statement "Diversification strategy can do more harm than good to a company" is for?
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