Advantages of Unrelated Diversification

Unrelated diversification is a process wherein a small business tries to expand yet utilizes a very diverse way of business expansion.

New products strike up the market so different from what one used to sell or offer. Advantages tags along with this marketing strategy.

The Meaning of Unrelated Diversification

This is a query that often bugs a person’s mind that constantly thinks about business expansion. This is a process that uses a different product that is offered to the market aside from the original product provided. One good example is a flower shop that offers different varieties of flower arrangements and flower styles. When unrelated diversification enters the business, this flower shop will expand to a coffee shop adjacent to it or maybe inside the flower shop. While the customers wait for their flower arrangement, they can sip a hot cappuccino. This is what unrelated diversification means.

Positive Points from Unrelated Diversification

The primary benefit is that an entrepreneur is spared from risking all his capital toward one business scheme. With unrelated diversification, one expands the business using a different marketing plan. This is like hitting two birds with one stone. The company will grow hand in hand with each other for will boost the other. This is very advisable for a business experiencing an economic crisis too. Instead of continuing to sell products that are not so demandable yet, one can resort to drastic product changes to aid the business for economic survival.

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Outsmarting the competition through this unrelated diversification is successful. The reason is that a business with this scheme has a fair advantage. In the flower and coffee shop example, customers will surely choose the shop wherein they can sip coffee too. Thus, the customers will be dragged towards the shop due to the additional spice. Indeed, with unrelated diversification, the business will bloom and prosper positively. Healthy completion occurs, as well as good revenue for the business.

The seasonality of products is an advantage to this unrelated diversification. The products in demand may come with the original products sold in a business. There are downfalls in the trade as well as highs. When the business is low, these peak-seasoned products are available, so the revenue will not decrease. Thus, this marketing strategy promotes cost efficiency. This is advantageous since one will not start all over again. Entrepreneurs will only add up some spice to the trade. The risk of engaging in unrelated diversification is worth it by merely concentrating on the original business enterprise.

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