If you’re looking to grow your business, one popular strategy is business diversification. This involves broadening your business's opportunities by entering new markets or offering new services to attract new customers.
In the following blog post, discover the pros and cons of diversification strategies and whether it's the right choice for your business's growth.
One of the greatest motivations for any business to diversify its marketing strategy is the opportunity to adapt to changes in the marketplace - from new consumer behaviours to exciting trends.
An example of a business who excelled by doing this is one of the world's most lucrative and influential companies: Netflix. The company began as an online DVD rentals service, sending out discs through the post. However, as Internet speeds increased, interest soared in video-on-demand services, and, in response, Netflix diversified into online streaming. The rest is history – and they’re now in the top ten of the world’s most profitable companies.
Many of the world’s leading companies today are ones who built their success by diversifying in a range of sectors. While Uber are most famous for their app, they’re also pioneering self-driving cars and Uber Eats - a food delivery service. Apple started out behind the keyboard, but they’re as famous today for their iPods, iPhones, and iPads. And a world-leading mobile phone company kicked off as a 19th century paper mill - in a Finnish town that’s still called Nokia today!
There are also occasions when it can be worth diversifying purely to keep up with your competitors, by using competitor research to see how your competitors are expanding, and then matching them. A recent example of this is BT adding BT Sport to its portfolio - just as Sky had introduced to Sky Sport and Sky Internet to theirs. It gave BT a chance to generate additional profits, promote their brand, and remain competitive in the market.
While diversification offers many positives to businesses, there are several risks of diversification and considerations that are important to keep in mind.
Firstly, when you’re adding new services or inventory to your business, you'll of course be hoping to see an increase in demand.
While it's good for your business to drive more custom, new pressures can creep into the workplace - from stock control, to working capital, to staff. If unattended, these can impact your business's reputation, atmosphere, and ultimately performance - in the short and long term. So, it’s important to ensure that if you’re expanding your offering, you have the manpower and financial security needed to cover costs and workload.
OThough all of these are international companies, it’s equally possible for small businesses to enjoy huge success by diversifying. If you’re running a café and one of your local competitors picks up on a new trend, consider whether you could follow suit, competing with them for trade. Alternatively, why not do some market research to spot opportunities that you could capitalise on, but your competitors have missed?
When considering diversification of your business, one of the biggest requirements is the need to have cash and funds that are available to use, whether to buy new equipment, invest in training, hire additional staff, or upscale premises. And being able to access money quickly could be important when you want to jump on trends/react to competition.
That’s exactly where our expert team is able to help, our unsecured business loans could help you keep on top of your cashflow while simultaneously expanding into new markets and pursuing exciting new directions.;