Question

In 250 words essay discuss using an example of your own the factors that contributed to the success or failure of diversification.

Answer 1

Explanation

Diversification can be defined as an expansion of business products and services within the existing area or in a new place of business. It is heigly risky strategy for an organisation. Diversification requires careful planning and proper execution of strategies for its success.

Diversification can be categorised into three types as follows:

1.Concentric diverrsification: Here, organisation steps towards development of new products and services ( closely related to existing products) and enter centre new place of business.

2.Conglomerate diversification : The organisation develops new product totally unrelated to the existing products and enters into new areas of business.

3.Horizontal diversification : Here, the product launched or produced are often and related to the current products but are introduced into existing current market.

The factors that may affect the success and failure of diversification may be as follows:

1. Success Factors:

• The product may prove to be unique and the product more demanding for customers.
• The products launched could be successful, if it fulfills the basic needs of customers.
• The cultural factor of an area may also play an important role in success of diversification.
• The diversification strategy can be successfully for organisation,if it reaches to geographically remote area and provide its products.

2. Failure Factors :

• The diversification strategy fails, if it is not executed carefully and at the right time.
• Diversification process fails, if customer finds no need of for the new product launched.