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Diversified product line or single advantages and disadvantages

Share on Facebook In a single-business approach, you rely on one product or product line, business format or customer base to generate all revenue. In a diversification strategy, you use a mix of product lines, business formats or customer markets. Both strategies may work for your small business, depending on your goals, strengths and weaknesses, and resources. Single-Business Benefits Specialization and expertise are central advantages of a single-business strategy.

Small businesses often develop from a single entrepreneurial idea or the core abilities of company founders. In a single-business strategy, you can concentrate all planning, budgeting, investments, operations and activities around developing an elite product or serving a specific customer market.

Differences Between Single Business & Business Diversification Strategies

This single-minded focus allows you to align company departments and employees around focused goals and gives you a better chance to brand your business based on its expertise in a particular arena.

Single-Business Challenges A drawback of a single-business setup is that you may miss opportunities to expand your company into naturally correlated industries or marketplaces. Additionally, a single-business strategy is sometimes riskier in the long run. If your industry becomes obsolete or struggles through economic conditions, you may be wiped out.

Risking everything on one endeavor leaves you nothing to fall back on.

  1. A company with a single business strategy is at one end of the spectrum. It expands your consumer exposure and makes your company and product names recognizable in the marketplace.
  2. Small-business owners often stick to a single business strategy until they raise enough capital to adequately fund a strategic expansion into a new market.
  3. When consumers recognize your brand as an industry leader, it enhances the rest of your marketing efforts.
  4. External Resources You can control your internal resources with product and marketing strategies, but those strategies also need to include external resources such as shipping companies and materials vendors.
  5. He has been a college marketing professor since 2004.

Diversification Benefits Diversification is commonly associated with risk minimization, whether in investing or business operation. If you operate in multiple product categories or business types, you are more likely to survive failure of one format or industry.

By diversifying, you can expand your supplier base, business partners and associates. This enables you to draw in other experts and talents.

Advantages and Disadvantages of Market and Product Development Strategies

A diversification strategy also gives you greater revenue potential if your company effectively serves the needs of customers in each business format. Diversification Challenges The extreme of diversification is spreading yourself too thin. If you try to do more than your resources, strengths and market potential can afford, you may end up not succeeding at anything. You also put more pressure on company leaders to stay on top of goals, strategies, partnerships and market factors in a diversification strategy.

Diversification requires more investment in product development and marketing, which makes it difficult to distribute extra cash through dividend payments to owners.

References Small Business Trends: Diversify or Die About the Author Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business.