Dependence on few products or services risks the long term performance of the organizations particularly in the industries where innovation is critical for growth. Small changes in the environmental conditions, regulations, demography, trends and customer's choices or invention of new products can bring it into troubled waters. This makes it necessary that the organizations utilize their expertise to develop different products and services which reduces their reliance on few product/service lines. This also helps to enter into new markets, which can also drive the growth of its existing services.
Diversification helps to reduce the risk for the company and helps in its further growth. However, it is difficult for an organization to bend its focus from existing services to new ones. If not done properly, it may also affect the present services and products adversely. Some of the major challenges faced by companies in going for diversified products/services are ?
Managing human capitalNew businesses may or may not be directly related to the core expertise of the organizations. If it is directly in line with their present work, the issue arises with allocating personnel to different departments without hampering the existing work. The organization may want to engage some of their best employees in the new development tasks which might affect the present work. On the other hand, if the work is quite unrelated to their present business, developing knowledge of the new business domain becomes a problem.
Effect on the present businessExpansion into new domains also requires additional infrastructure and capital to move into business. Companies may share part of the available capacity from present business as well as affect its liquidity position. Thus, its effects on the present business must be carefully examined and capacity expansion phases needs to be well organized.
Managing brandProducts and services offered by the organization form its identity. New services may be projected with the same identity or into a new avatar. Linking of new services can alter the way it is perceived by the customer and investor segments. To maintain the same identity, expectations from existing services must be maintained into the new services as well. However, if it is given a separate brand, it does not get the benefit of its existing position.
Handling competitionNew foray brings new competitors too. The new market can have different market structure or customer behaviour. Strategies to tackle the competition in these fields will differ significantly from the existing ones.
How BMGI can bring a change?
BMGI has worked with various organizations to develop strategies for expansion of their business into different domains by drawing a clear understanding of business environment, customer requirements and matching them with the capabilities of the firm.
We build on the vast experience of the multiple businesses developed through projects and help firms in maintaining cohesion within different domains. Our expertise on innovation driven approach helps to create a formidable position into the business taking over their competitors in comprehensive manner.
If you have further questions about diversifying your small business, contact BGMI today.