Question

Diversification merits strong consideration whenever a single-business company faces diminishing market opportunities and stagnating sales in its principal business. Identify a company you feel should diversify and explain why.

Answer 1

Colgate Palmolive is a household name and has been into existence for over 200 years. The company is a leader in Oral care segment mainly Toothpaste. It has high brand value and presence in over 190 countries. The Palmolive is for Personal care products with superior quality. However, in compared to their competitors, they have not expanded to new space basis market shift. The company has been stagnant in last 5 years in regard to overall revenue which is close 15 billion dollar as on date. There are lot of domestic as well as global players who have capitalized on new market trends and came up with innovative products. Example: Perfume and Deodorant category is growing at double digit which has high margin potential, Personal hygiene products like Hand Sanitizer, Home Sanitizer is the other category which rapidly expanding. Similarly, there are many categories like organic shampoo and shower gel, beauty products on whitening and skin care etc. which company can look to explore. The advantage of diversification is that it increases revenue for the company as they are able to capitalize on high brand value. Also, during tough economic scenario, they have high chance of survival and low risk due to wider product assortments. So, Colgate should look to diversify into new cateogiers.

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