Diversification Versus Expansion

Diversification or Expansion, what is the right path?This is the age old question for business owners and the trickiest.  The varying factors that a business owner needs to consider are:

1. Business environment
2. Current cash flow
3. Resource levels
4. Cost of the new vertical
5. Is this suitable for your current customer base

Diversification can be about developing new products/services, exploring new markets, and taking new risks.The perception of risk comes down to a way to maintain a measurement of business stability. Considering diversification is like the finance world hedging their bets and ensuring that one investment does pan out, you have a backup plan to either relaunch or restrict loss in the portfolio until you find your footing again.The concept is much the same in the world of business ownership. Since the business sector is unpredictable at best, and consumer behaviours are notoriously fickle, it can pay to broaden your company’s horizons and pursue new opportunities – no matter how confident you may be in your existing product line.The cost of ignoring this can be severe, always keep in mind Blockbuster and Video Ezy as you don’t want to belong to the last generational business group. As the world went digital, these companies did not and failed to claim their place in the new order. They could have transitioned and become the “Netflix” of the entertainment industry.

What What is Expansion?

Business expansion is growth by increasing the number of collection points your customers can buy products and services from you.All successful business start-ups face the question of handling business expansion and growth. Business expansion is a stage in a company’s cycle that is fraught with both opportunities and risks. The growth of the business can carry with it an increase in financial fortune for owners and increased pressure. Expansion is usually the ultimate endorsement of the business’s initial concept, and the subsequent effort to bring that vision to fruition.Growth causes a variety of changes, all of which present different challenges and pressures in different areas of the business. Growth means that new employees will be hired who do not understand the cultural aspects of the business or the journey you have taken to arrive at this point, but it is up to you and the existing management team to assist with this process.Growth could also mean that the company’s management will become less centralised, and this may raise the levels of unease amongst the staff and managers.  So in this scenario having a firm and structured business and management strategy will not guarantee success but the percentage of success with be improved.Regardless of the path you take, success is in your hands along with failure.  The key is to have the ambition that you had when you first launched your business and use the same vigour to launch the next stage of your business.  Good luck and happy ______________ (fill in the blanks).Liked this post? You may find our Leadership or Management blog when managing an expansion or diversification transition, may help.