The advantage and disadvantages of a corporation diversifying internationally
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Diversification, as a risk management means, mainly concerns the alteration and experimentation of various kinds of investments that are included in a specified portfolio. The reason why it is the usual practice is because a certain portfolio is mostly inclusive of different investments that can bring about higher profits as a relatively lower risk of stand-alone investments within the similar or even same stake mix. However, diversification can give its advantages into full play just by virtue of secure investments or investments of international securities due to the lower relationship between the local investing projects.
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Here, the term diversification is referred to as the strategic instruction that leads relevant companies or organizations to other competitive goods, services, or even the marketplace through both external and internal developments so to speak. In this vein, diversification can be divided into many categories as follows. Type of Diversification
What comes as the first is the concentric diversification meaning that industries relating to the technological aspect have many similarities, because of which the companies can make contrasts and comparisons in terms of technological issues so as to gain more advantages in the market. However, in order to do this, it is necessary to make appropriate change in both the marketing strategies and methods that are used by the noted business. The major purpose of this practice is to boost the overall market value for a specific product or service so as to gain as many profits as possible. Meanwhile, the strategy of concentric diversification can also allows an organization to apply the similar or even the same products or services to their business line that has already existed. To illustrate, a producer of personal computers may start to yield more laptop computers, which, however, should be accomplished through the efforts of the skilled workforce in this field. In this line, the strategy of concentric diversification can also be used in the industry of food production. For this, a maker of ketchup may turn to producing salsa by use of his currently-existing production devices.
Advantages of the concentric diversification
Enhancing Business Synergy
By referring to synergy, it means the capacity of the smaller sectors or departments of an organization to accomplish the overall objective of the whole company rather than work as just individuals. However, synergy can be created only when the company has already achieved strategic fits by dint of concentric diversification. Here, the strategic fits are referred to as the product of the company acquiring more businesses or developing new products or complementary divisions. For instance, a maker of toys can merge and acquire toys from other counterparts in the country so as to increase their product distribution, expand their business, and bring their products or services to a new market.
Accelerating Product Development
It is true that the development of corporate synergy via concentric diversification in the marketing process may result in the improvement of product design and production. Thus, it is wise for the company to be aware of the consumers’ needs and interests within the given marketplace especially when its marketing divisions have the similar task with the sectors of product development. Doing this can help guarantee that the business can be only open to such products and services that can suffice the needs of the immediate market. With this strategy,...