What is diversification?
Diversification is a strategy used by businesses to encourage higher returns and lessen the risks. Diversification will involve the introduction of new products, new services or operating in a new market to that of which the business originated. Some companies might diversify by adding new products to their existing line to reach a new target audience or they might develop different sources of income in a different business sector altogether.
Examples of companies that have recently diversified their product ranges:
Dyson has used the technology in their vacuum cleaners to develop a range of premium hair styling products for women.
McDonald’s, taking note of the growing trend in veganism, have launched their first fully vegan meal.
Businesses fall under different categories for diversification; Low, medium and high. A business with low diversification levels will get 95% of their revenue from a single source, a business with medium diversification will have less than 70% of their revenue from their dominant business and all the products and distribution will be linked. High or very high diversification levels will see less than 70% of revenue from their dominant business and there will be limited to no related links to other units.
Who is diversifying in response to covid19 and how?
Coty, the owner of brands such as Clairol, Gucci and Burberry, has been pushing its online sales and has announced that demand for its products on Amazon has nearly doubled recently. Albeit they have announced an overall loss. This will be a similar story for many retailers, they will quickly adapt to selling products online and may find an increase in demand as consumers are taking to online shopping. Many consumers are saving money on travel and eating out and might be treating themselves via online shopping. Online shopping is the only way in which many products can now be bought.
In the UK, various manufacturers have started developing PPE to contribute to the fight against the coronavirus. Numatic, the Henry Hoover manufacturer are supplying facemasks to the NHS and some gin distilleries are starting to produce hand sanitizer, many not taking any profits.
The dance and fitness industry has been able to quickly diversify how their services reach the public. Lessons and training can now be accessed via live social media videos, lessons can also be offered in private Zoom meetings or even via an app.
What can we learn from this?
COVID-19 has most certainly ripped the rug from under our feet, this is an unprecedented situation the is rapidly evolving and no one knows when or how it will end. From a business consulting perspective, it is teaching us the importance of having an open mind. It has also highlighted how important it is for directors and managers to be innovative and resourceful. Moving forward, we will all think differently. Be sure to have that Plan B. Invest in as much education as you can and ensure you can keep up with technology where necessary. I have worked with many businesses as a consultant and part of my experience in diversification strategy has given me a unique way of looking at this situation as it unfolds. Diversification opens a door to a new way of delivering services and products, a new way of marketing and teaches us to think about the wider picture rather than what is right in front of us. As business owners and managers, when we find ourselves in the wake of this pandemic, lest we forget to focus on strategies for unexpected situations as we get waylaid concentrating on growth.
As a business consultant, I have helped many businesses through difficult situations. I have a diverse skill-set that is able to steer a company in any direction whether it’s dealing with challenges, striving for growth or streamlining services. To find out more about how I can help your business please book a free consultation and find out if you are ready to make an investment in your company’s’ future. Now is your time to shine.
MBP business consultancy services offer consultancy services to a range of industries.
Malcolm can also be a Non- Executive Director or interim CEO/MD. Malcolm has experience in a broad range of industries including but not limited to the retail and tourism industries and has overseen several multi-million-pound projects throughout his professional career
Please get in touch and see how Malcolm can help develop your business.
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