What do you do?
This is where product diversification comes in. Instead of offering just one product, firms can branch out into offering multiple products (which are often related). Or they could market their existing products for use in another market segment.
TO DIVERSIFY OR NOT TO DIVERSIFY? ASK YOURSELF THESE SIX QUESTIONS
WHAT CAN OUR COMPANY DO BETTER THAN ANY OF OUR COMPETITORS IN OUR CURRENT MARKET?
Just as it is important to take stock of the pantry before going shopping, so is it crucial for a company to identify its unique and unassailable competitive strengths before attempting to apply them elsewhere. Leaders need to think not about what their company does but about what it does. better than its competitors.
WHAT STRATEGIC ASSETS DO WE NEED IN ORDER TO SUCCEED IN THE NEW MARKET?
Companies need to know everything about the new business in order to successfully diversify. Consider Coca-Cola, which decided in the early 1980s to acquire its way into the wine business. It has intimate knowledge of consumers, marketing and branding expertise, and superior distribution capabilities – but no knowledge of making wine. For that reason alone, it failed.
CAN WE CATCH UP TO OR LEAPFROG COMPETITORS AT THEIR OWN GAME?
If looked at in a different way, in light of the second question: If we are missing one or more critical factors for success in the new market, can we purchase them, develop them, or make them unnecessary by changing the competitive rules of the industry? Can we do that at a reasonable cost?
WILL DIVERSIFICATION BREAK UP STRATEGIC ASSETS THAT NEED TO BE KEPT TOGETHER?
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