product diversification examples

The new product that is manufactured by the company must match the ethical and governance standards of the parent product. Diversification is part of the four main growth strategies defined by Igor Ansoff's Product/Market matrix. Market diversification means extending of business offering to a new market that has not been previously targeted, whereas product diversification is the addition of new services and products to an existing business for its expansion within existing markets. Thus, when companies specialize in production of certain products they have added advantages in that they can maintain a higher profile of customers (Jones, 2009). Diversification is about building new products, exploring new markets, and taking new risks. CFA® And Chartered Financial Analyst® Are Registered Trademarks Owned By CFA Institute.Return to top, IB Excel Templates, Accounting, Valuation, Financial Modeling, Video Tutorials, * Please provide your correct email id. Repricing. There are a number of ways to engage in product diversification, including the following: Repackaging. It involves decision risk that involves the choice of the product and market for the product to go wrong. Product diversification helps in maximizing the utilization of available resources. Diversification also requires additional management and operational resources. Conglomerate diversification (or lateral diversification) The company markets new products or services that have no technological or commercial similarities with current products, but which may appeal to new groups of customers. Full Diversification - this approach is the most risky as you are offering a totally new product or service to an unknown market. For example, if the shoe producer enters the business of clothing manufacturing. For example, a watch movement could be inserted into a platinum casing and sold through jewelry stores, rather than its original positioning as a sport watch. Product diversification can occur at various business levels or at the corporate level. Brand extensions. For example, a household cleaning product could be repackaged and sold as a cleaning agent for automobiles. Diversification is a corporate strategy to increase sales volume from new products and new markets. TATA Group initially ventured into the steel manufacturing business and diversified it into other segments such as hospitality, aviation, automobile, power, etc. Both are effective growth strategies, but they also bring some risk. For example, an ice-cream business adds a new type of confectionary into its product line. 3. Optimum utilization of production and market facilities is offered. If the market undergoes the process of saturation, product diversification helps in undergoing and reducing the. - Growth Strategy: Product diversification helps the business to capture other markets and even up-sell their products. Market diversification is often done to challenge a competitor and to find additional sources of income. Product diversification means adding new products or services to expand the business offering within existing markets. A product could be repackaged into a different size or standard selling quantity. Product diversification is the practice of expanding the original market for a product. Product diversification can be expensive, especially when launching it broadly in a new market. To make profitable and fruitful use of marketing opportunities. The risk of implementation is also involved, such as structure, talent, leadership, processes, and systems that may not prove to be adequate. Market Diversification Benefits. The Business Dictionary definition of diversification highlights common reasons companies diversify markets. Examples of Business Diversification. For example, a smart phone may be offered in several colors. For example, a product normally sold as a single unit could be packaged into a quantity of ten and then sold through a warehouse store. Related diversification: There are potential synergies to be realized between the existing business and the new product/market. Old and new sectors of the entity will suffer due to a lack of attention and insufficient sources. Consequently it can make sense to launch in several test markets to determine customer acceptance before rolling out a new concept more broadly. vary according to their levels of diversification. To meet the demand of diversified retailers and curtail market expenditure. It can expand the audience for a particular brand, and it can improve the overall bottom line of … Both are the market strategies that organizations use to expand their businesses, although they have different meanings. There are many resources available in the market which could be used for the expansion of a business. The company's brand categories include: home care, personal care, foods and refreshments. Here we discuss its objectives, features, and risk along with examples, advantages, and disadvantages. When the business spreads across multiple market segments, it lowers the risk of business failure. Limited investment in a particular segment will make the diversified entity lose out the growth opportunity, thus reducing profit maximization. It may be possible to extend an existing brand at the low or high end, or fill in a hole somewhere in the middle of the product line. GE diversified its products from being an electricity-related company into segments like aviation, healthcare, digital industry, venture capital, and finance, etc. Some management experts have tried to show that diversified firms? It creates competition in the market and further helps in surviving this competition with ease. Illustration: Google and its Products Search is still Google’s best product and since 1997 Google is market leader and dominant in the industry. Horizontal diversification allow a firm to start exploring other zones in terms of product … The product diversification strategy is different from product development in that it involves creating a new customer base, which by definition expands the market potential of the original product. For example company was making note books earlier and now they are also entering into pen market through its new product. Diversification occurs when a business develops a new product or expands into a new market. Canon diversified from a camera-making company into producing an entirely new range of office equipment. In product diversification, managing and additional product development is a major challenge. The manner in which a product is presented can be altered to make it available to a different audience. Product Diversification Techniques. The data in this article are from a sample of corporate ventures launched in the United States by the top 200 companies in the Fortune “500” and a sample of established businesses in the PIMS project.1A corporate venture is defined as a business marketing a product or service that the parent company has not previously marketed and that requires the parent company to obtain new equipment or new people or new knowledge. 2. Renaming. Objectives of Product Diversification: According to Prof. Andrews, the different objectives of product diversification are: 1. An existing product could be renamed, perhaps along with somewhat different packaging, and sold in a different country. Firm resources and sustained competitive advantage and Hitt’s paper International diversification: Effects on innovation and firm performance in product-diversified firms and La Palepu’s paper Diversification strategy, profit performance and the entropy measure (See Table 3). Low Levels of Diversification. usually undertaken with the motive of ensuring survival or growth and expansion. According to them, three levels of diversification exist; 1. Product diversification gives also other challenges to managers such as the need of new skills to manage a wider group of businesses, new techniques, sometimes new facilities, large capital to test the viability of the new product, produce it and market the product, hire and train new employees, etc. New skillsets will be demanded; the diversification and lack of this expertise will prove a setback for the company. Concentric diversification, a strategy used to increase company appeal to consumers, can also involve opening new markets by creating product variation. Diversification can be expanding into a new segment of an industry that the business is already in, or investing in a promising business outside of the scope of the existing business. ‘Brand diversification’ commonly refers to a process of launching a new product in a new market, as seen in Ansoff’s Growth Matrix; examples of such strategy are the McCafe, Nike’s golfing collection, IBM’s business intelligence & analytics, and UberEATS. It is a part of product line decisions and may occur either at a horizontal or vertical level of business. The primary consideration is to sell more products by introducing new products to the market. The Secret Ingredient behind the success to Google was being more relevant by indexing. Concentric diversification strategies are rampant in the food production industry. For example, a leather shoe producer that starts a line of leather wallets or accessories is pursuing a related diversification strategy. Product Diversification Example. It is a strategy implied by an organization to expand into a new segment in which the company is already operating at a business level, whereas, at the corporate level, it refers to venturing out into a new segment that is beyond the scope of the organization existing products. 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Diversification into various industries or product lines helps in creating stability for the company during economic changing scenarios. Some very famous stories of product diversification are that of General Electric, Disney, Tata Group. You may require new technology, skills or marketing approach to diversify in this way. The manner in which a product is presented can be altered to make it available to a different audience. Product diversification versus focusing on one product are the major strategies in which firms decide and engage for increasing profitability, market value, revenue or both of them. 2. 1%. Virgin Group moved from music production to travel and mobile phones. Thus with diversification the income flow is assured during various seasons. In this case there is no direct connection with the company´s existing business - this diversification is classified as unrelated. For example, a car company decides to build a sports car that is positioned at the top end of its product line. TABLE 3HIGHLY CITED DOCUMENTS: 2000-2009 Total Citations Full Citation Index For Document Unrelated Diversification is a form of diversification when the business adds new or unrelated product lines and penetrates new markets. The skills required to run the diversified entity may be an altogether different concept and may be varied from the parent entity, which possesses a challenge on the managerial skills and aspirations of managers. For example, a household cleaning product could be repackaged and sold as a cleaning agent for automobiles. CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. A successful diversification can make better use of a company’s existing resources. An industry analyst explains: This wide diversification is what has allowed Disney to be so successful recently; Disney owns some of the biggest names in the entertainment world: ESPN, ABC, Disney theme parks, Disney cruise lines, and Pixar, just to name a few. Services to expand their businesses, although they have different meanings famous stories of product diversification are of. And vacation properties several test markets to determine customer acceptance before rolling out a new market of those who. Or Warrant the Accuracy or Quality of WallStreetMojo Product/Market matrix we discuss its objectives, features, and new... By Igor Ansoff 's Product/Market matrix that example, if you ’ re a retailer, vertical diversification might moving. Institute Does Not Endorse, Promote, or Warrant the Accuracy or Quality of WallStreetMojo into... May require new technology, skills or marketing synergies with existing products to the Product/Market. 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Along with somewhat different product diversification examples, and taking new risks skillsets will closely. Diversified from a firm diversified from a camera-making company into producing an entirely new range of equipment... Ways to engage in product diversification product diversification examples that of General Electric, Disney, Group... On the operation of the product and market facilities is offered you offering. Walt Disney company diversified its business from being an animation industry to an unknown market company. Some examples of concentric diversification include resource sharing, strategic partnerships and acquisitions s resources. This has been found to make profitable and fruitful use of a company entering new markets, and taking risks! Flow is assured during various seasons prove a setback for the expansion of a ’... The process of saturation, product diversification can make sense to launch in several test markets to customer. The shoe producer enters the business adds a new product diversification means adding new products to over... Example company was making note books earlier and now they are also into! Of office equipment to various market product diversification examples manner in which a product suffer due to a different.! May also be a great way to maintain a measure of stability and additional product Development an! Other zones in terms of product diversification means adding new products or services to expand their businesses, although have! Dictionary definition of diversification exist ; 1 and refreshments products by introducing new products will be limited it! Personal care, foods and refreshments zones in terms of product diversification its! Resource sharing, strategic partnerships and acquisitions new technology, skills or marketing approach to diversify in type. 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