Question

"Is it better for a company to produce only one product? Or is it better for a company to produce several products? Put differently, is diversification better than specialization, or is specialization better than diversification?"

Answer 1

Diversification better than specialization, or specialization better than diversification?

In order to discuss the above statement its very important to know the meaning of both the terms, here we go to understand the meaning of the terms-

Diversification is a business strategy in which a company enters a market different from its core activity. It has been followed in order to reduce the risk of relying on just one or a few income sources.

Specialization is a strategy developed by a business to focus on the production of a very limited range of products or services in order to gain maximum productivity, expertise, and leadership in the targeted field.

Diversification helps to boost business and specialization in a particular area can acquire great rewards, so important to keep both specialization and specialization for the betterment of the company.

While making a decision of diversification and specialization important to understand the nature of your business and understanding the competitor and their products. Diversification in the product will lead to reaching new customers to be this strategy be a successful plan and execute the strategy well.

Market and consumer research will provide a key to understanding in making a decision of diversification or specialization.

Choosing specialization provides the business the opportunity to position better than competitors and catch the niche market and both can help to increase revenue and achieve new growth.

Diversification is good once the company has a large number of resources and for the company having a small number of resources or for a newly incorporated company better to focus on specialization.