Marketing: Diversification, Concentric and Conglomerate

Diversification is a common strategy used by businesses to reduce risk and expand their operations into new markets. There are two main types of diversification: concentric and conglomerate business structures.

Concentric Diversification:
Concentric diversification involves expanding into related products or services that complement the company's existing offerings. The idea is to leverage the company's existing capabilities and resources to enter new markets and generate additional revenue streams.

For example, a company that produces and sells mobile phones may decide to diversify into the production of mobile phone accessories, such as phone cases or screen protectors. Since the company already has the infrastructure in place to manufacture and sell mobile phones, expanding into related products is a logical next step.

Concentric diversification offers several advantages. For one, it allows companies to leverage their existing capabilities and resources, which can reduce costs and increase efficiency. It also allows companies to enter new markets that are related to their existing offerings, which can help to reduce risk and increase profitability.

However, there are also some potential drawbacks to concentric diversification. One risk is that the company may become too focused on its existing products or services, which can make it difficult to innovate and adapt to changes in the market. Additionally, if the company's existing offerings are not successful, it may be difficult to enter related markets and generate additional revenue streams.

Conglomerate Diversification:
Conglomerate diversification, on the other hand, involves expanding into unrelated products or services that have no obvious connection to the company's existing offerings. The idea is to enter completely new markets and generate additional revenue streams that are not dependent on the company's existing capabilities or resources.

For example, a company that produces and sells mobile phones may decide to diversify into the production of pet food. This type of diversification is unrelated to the company's existing offerings and requires an entirely new set of capabilities and resources.

Conglomerate diversification offers several advantages. For one, it allows companies to enter completely new markets and generate additional revenue streams that are not dependent on their existing offerings. This can help to reduce risk and increase profitability.

Additionally, conglomerate diversification can help to reduce the company's dependence on a single market or product, which can help to reduce the impact of economic downturns or other external factors.

However, there are also some potential drawbacks to conglomerate diversification. One risk is that the company may not have the necessary capabilities or resources to be successful in the new market. This can result in wasted resources and lost revenue.

Another risk is that the company may become too diversified, which can make it difficult to manage and focus on core competencies. If the company's core business suffers as a result of diversification efforts, it may be difficult to recover.

In conclusion, diversification is a common strategy used by businesses to reduce risk and expand their operations into new markets. There are two main types of diversification: concentric and conglomerate business structures.

Concentric diversification involves expanding into related products or services that complement the company's existing offerings, while conglomerate diversification involves expanding into unrelated products or services that have no obvious connection to the company's existing offerings.

Both types of diversification offer advantages and disadvantages, and companies must carefully consider their options before deciding which approach to take. Ultimately, the key to successful diversification is to enter new markets that are compatible with the company's existing capabilities and resources, while also ensuring that the company does not become too diversified and loses focus on its core competencies.

Видео Marketing: Diversification, Concentric and Conglomerate канала Galton College