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Pros and cons of diversification
The goal of diversification is to increase profits by launching new products and also doing market research in order to identify new markets for the company. You may decide that you are going to generate products that are on a completely different level from your company. Let's say you are the manufacturer of soda pop cans and one day you decide that you have a great recipe and you want to create your own soda. Now you are diversifying your products by selling the soda itself not just the can but the entire package together. It is a risk but it can be a huge profit if you do it correctly. In order to help you understand what diversification is exactly, let's look at the various plans that are out there: Like any new idea this is one that needs to be well thought out before you do it. You need to know exactly what you are getting yourself into and if this is really what you want to do. There are different ways in which you can implement it and your employees may initially resist all of them so you have to come with strong leadership skills to show the employees that this is the way the company is headed. You need to focus on the fact that you will be expanding your customer base and really reaching out to a new audience. This is a great way to show the employees why diversification is so important to your company. Now let's look at the cons of diversification. Are you really prepared to take on a new industry? Can you come up with the money to do this? What about the manpower that will be required in order to help you diversify your company? It is going to take a lot of hard work to get it going and what happens if it doesn't work? You will be left as a failure and you might lose your entire company over it if you are not careful. Diversification is a huge risk and if you don't do all of your research and really know what you are dealing with here, it is likely that it will backfire on you big time. |
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