What is business diversification?
Business diversification concerns the process by which the company or organization uses the trade strategy of diversification as a means of goal. There is no reason to embark on business diversification because it depends on the goal that the company or organization is trying to achieve. Some companies may decide to start business diversification to expand their risks, while others can simply use it as an expansion and growth means. Various forms of business diversification include areas such as customers, products or services, geographical and suppliers.
Customer diversification is a form of business diversification, which includes the company's plans to diversify its products or services with a specific goal to focus on customers who are not currently part of the company's main customer base. For example, a company that is known for the production of products focused primarily on adolescent girls can decide to diversify their PAn uninvitement to capture demographic women. Such a process of diversification of business may include the production of items focused on this selected demographic and creating awareness of this new diversification process. This strategy is important because it helps society to spread or alleviate its risks, so if a adolescent market decreases, society can still rely on business from older women.
Another process of business diversification is geographical diversification. As the name suggests, geographical diversification includes the physical aspects of society's efforts to diversify. This process is even more necessary in the era of globalization, where many companies realize that markets are outside their geographical boundaries. A good example of companies that use this type of diversification are various fast food companies often open new branches in various places around the worldE trying to increase their range and subsequently maximize their profits.
Supplier diversification means that the company diversifies the source of its raw materials and other necessary supplies. The aim of this diversification tactics is also to reduce risks. If the company relies only on one supplier or resources for its raw materials, it exposes the risk that it will have no possibility if the supplier or source ever appears a problem. For example, the supplier may increase the price of raw materials, and if the company has no alternative, it will certainly affect its profit range.