product diversification examples

Brand extensions. Product Diversification Example. The company's brand categories include: home care, personal care, foods and refreshments. Canon diversified from a camera-making company into producing an entirely new range of office equipment. Diversification occurs when a business develops a new product or expands into a new market. Limited investment in a particular segment will make the diversified entity lose out the growth opportunity, thus reducing profit maximization. Product diversification can be expensive, especially when launching it broadly in a new market. For example, a smart phone may be offered in several colors. Product diversification is a business strategy which involves producing and selling a new line of products or product division, service or service division which involve either same or entirely different sets of knowledge, skills, machinery, etc. Therefore, in this type of growth strategy, the firm only focuses on the introduction of new products. 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. Virgin Group moved from music production to travel and mobile phones. 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. But as risky as it can be, it may also be a great way to maintain a measure of stability. GE diversified its products from being an electricity-related company into segments like aviation, healthcare, digital industry, venture capital, and finance, etc. Horizontal diversification allow a firm to start exploring other zones in terms of product … Combined Strategies – Diversification; Product development. 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. 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. It is also sometimes called product differentiation. An existing product could be renamed, perhaps along with somewhat different packaging, and sold in a different country. Conglomerate diversification (or unrelated diversifcation) on the other hand is about entering a new market with a new product that is completely unrelated to a company’s existing offering. For example, a household cleaning product could be repackaged and sold as a cleaning agent for automobiles. Resizing. Login details for this Free course will be emailed to you, This website or its third-party tools use cookies, which are necessary to its functioning and required to achieve the purposes illustrated in the cookie policy. There are a number of ways to engage in product diversification, including the following: Repackaging. Diversification is a corporate strategy to increase sales volume from new products and new markets. However, there is a paradox about which strategy is the best one for firms in realizing the ends. A great example of a conglomerate is Samsung, which is operating in businesses varying from computors, phones and refrigerators to chemicals, insurances and hotel chains. According to them, three levels of diversification exist; 1. Consequently it can make sense to launch in several test markets to determine customer acceptance before rolling out a new concept more broadly. ‘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 creates competition in the market and further helps in surviving this competition with ease. Some management experts have tried to show that diversified firms? Horizontal Diversification. It is a part of product line decisions and may occur either at a horizontal or vertical level of business. It involves decision risk that involves the choice of the product and market for the product to go wrong. The manner in which a product is presented can be altered to make it available to a different audience. For example company was making note books earlier and now they are also entering into pen market through its new product. Diversification also requires additional management and operational resources. 2. Thus with diversification the income flow is assured during various seasons. Here we discuss its objectives, features, and risk along with examples, advantages, and disadvantages. Market Diversification Benefits. 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. Product diversification is the practice of expanding the original market for a product. Product extensions. For example, a household cleaning product could be repackaged and sold as a cleaning agent for automobiles. Concentric diversification involves adding new products that have technological or marketing synergies with existing product lines or industries, but appeal to new customers. Thereby maximizing the sales of the product and serving the consumer needs from a firm. Concentric diversification strategies are rampant in the food production industry. 1%. The challenges involved in market diversification are research and planning, advertising, marketing, and activities needed to sell a product to a new segment. Product Diversification Techniques. usually undertaken with the motive of ensuring survival or growth and expansion. Both are the market strategies that organizations use to expand their businesses, although they have different meanings. Concentric diversification, a strategy used to increase company appeal to consumers, can also involve opening new markets by creating product variation. 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The asset base of a company is determined by the amount of sales made in a particular period of time. This strategy is used to increase the sales associated with an existing product line, which is especially useful for a business that has been experiencing stagnant or declining sales. Product diversification means adding new products or services to expand the business offering within existing markets. The primary consideration is to sell more products by introducing new products to the market. Some examples of concentric diversification include resource sharing, strategic partnerships and acquisitions. For example, if the shoe producer enters the business of clothing manufacturing. Moderate to High Levels of Diversification. This strategy depends heavily upon customer loyalty for existing products to transfer over to the new products and business. 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). Similarly, Walt Disney company diversified its business from being an animation industry to an amusement park film production and television industry. 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. 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. A product could be repackaged into a different size or standard selling quantity. For example, a car company decides to build a sports car that is positioned at the top end of its product line. There are two types of diversification a firm can employ: 1. CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. Related Corporate Diversification - related constrained or related linked?Unilever is definitely the king of product diversification with over 30 brands being sold in more than 190 countries. The manner in which a product is presented can be altered to make it available to a different audience. Some very famous stories of product diversification are that of General Electric, Disney, Tata Group. Diversification is part of the four main growth strategies defined by Igor Ansoff's Product/Market matrix. When the business spreads across multiple market segments, it lowers the risk of business failure. Illustration: Google and its Products Search is still Google’s best product and since 1997 Google is market leader and dominant in the industry. Repricing. 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. If the market undergoes the process of saturation, product diversification helps in undergoing and reducing the. For example, a phone company that adds or expands its wireless products and services by purchasing another wireless company is engaging in related diversification. A business is defined as a division, product line, or other profit center within its parent … This has been a guide to What is Product Diversification & its Meaning. To meet the demand of diversified retailers and curtail market expenditure. 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. 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. Apple moved from PCs to mobile devices. 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. 2. The new product that is manufactured by the company must match the ethical and governance standards of the parent product. GE diversified its products from being an electricity-related company into segments like aviation, healthcare, digital industry, venture capital, and finance, etc. For example, If you’re a retailer, vertical diversification might mean moving into manufacturing the products you currently sell. 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. You can learn more about from the following articles –, Copyright © 2021. It will also take considerable time to accomplish. There are a number of ways to engage in product diversification, including the following: Repackaging. For example, an ice-cream business adds a new type of confectionary into its product line. Product diversification helps in maximizing the utilization of available 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. 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