ANSOFF’S MATRIX - DIVERSIFICATION Flashcards
What is diversification
Diversification is the strategy of achieving growth through targeting new customers with new products.
What are examples of diversification
Product - market research, research and development, ‘copycat’ products, transferring core competence into new use
Price - will depend on objectives
Promotion - informative advertising, use of PR
Place - likely to require new distribution channels
Why do businesses use the diversification strategy
Organisation has core competence that they believe can be successful in new market
Organisation has trusted brand image that is transferable
Lack of growth opportunities/ high levels of competition in current market
Spread risk - Allows a business to not put all of their eggs in one basket - if for some reason one of their products is no longer wanted they can still sell another that they sell.
Necessity for vertical integration
Ambition
What is the value of diversification
Creates opportunities for growth
Spreads risk across new markets
Enhance brand image
What are the drawbacks of diversification
Highest risk strategy - don’t know product or customers
Likely to be very expensive, may require extensive investment in market research, R&D and promotion
Could dilute or damage brand image if unsuccessful
