{"id":35087,"date":"2025-09-21T21:30:04","date_gmt":"2025-09-21T21:30:04","guid":{"rendered":"https:\/\/certifeka-edu.com\/programs\/strategic-planning-professional-certificate-2\/lessons\/lesson-3-diversification-2\/"},"modified":"2025-09-21T21:30:04","modified_gmt":"2025-09-21T21:30:04","slug":"lesson-3-diversification-2","status":"publish","type":"lesson","link":"https:\/\/certifeka-edu.com\/ar\/programs\/sample-course\/lessons\/lesson-3-diversification-2\/","title":{"rendered":"Lesson 3: Diversification"},"content":{"rendered":"

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Lesson 3: Corporate Strategy – Part Two<\/h2>\n

3.Diversification<\/h3>\n

According to strategist Richard Rumelt, companies begin thinking about diversification when their growth has stagnant and opportunities for growth in the original business have been exhausted.<\/h5>\n
This usually occurs when an industry consolidates, becomes mature, and most of the surviving firms have reached the limits of growth though vertical and horizontal growth strategies.<\/h5>\n
Unless the firm is able to expand internationally into less mature markets, it may have no choice but to diversify into different industries if they want to continue growing.<\/h5>\n
Diversification is the process of venturing into new industries, distinct from a company’s core or original industry, to make new categories of products that can be sold profitably to customers in these new markets.<\/h5>\n
Diversification means moving into new lines of business. When an industry consolidates and becomes mature, most of the firms in that industry would have scaled the limits of growth using vertical and horizontal growth strategies.<\/h5>\n
If they want to grow further the only option available to them is diversification by expanding their business activities into different industry.<\/h5>\n
Diversification strategies are also pursued in normal case to spread risks so that company’s performance is cushioned out as various industries goes through different cycles.<\/h5>\n
Of the various growth strategies, diversification is definitely the most complex and risky course.<\/h5>\n
Diversification approach to growth is complex since it seeks to enter in new product lines, processes, services or markets which need different skills, competencies and knowledge from those needed for the current business.<\/h5>\n
It is risky as it involves deviating from current products and markets.<\/h5>\n

Issues & Controversies in Directional Growth Strategies<\/h3>\n

When it comes to selecting growth option, strategic managers do have so many dilemmas-<\/h5>\n
i. Is vertical growth better than horizontal growth?<\/h5>\n
ii. Is concentration better than diversification?<\/h5>\n
The purpose of corporate-level strategy is to increase long-term profitability.<\/h5>\n
A company should pursue any and all strategies as long as strategic managers have weighed the advantages and disadvantages of those strategies and arrived at an option that justifies them.<\/h5>\n
As of now lot of growth strategies and firm have two options to pursue these strategies.<\/h5>\n
A firm may pursue these growth avenues through internal developments (organic growth) or through external manner (inorganic growth) that is mergers, acquisitions, strategic alliances, joint venture, etc.<\/h5>\n
Diversification is a business development strategy in which a company develops new products and services, or enters new markets, beyond its existing ones. A diversification strategy can kick-start a struggling business, or it can further extend the success of already highly profitable companies. Why is diversification important in business? There are four key reasons why businesses adopt a diversification strategy:<\/h5>\n