Drivers for Diversification of Business

Drivers for diversification refer to the factors that motivate an organization to expand its operations beyond its core business or enter new markets. The drivers for diversification may vary based on the organization’s strategic objectives, industry dynamics, and competitive landscape

Main 4 Drivers for diversification are:

  1. Exploiting economies of scope: This refers to the ability of an organization to use its existing resources or capabilities to enter new markets or offer new services. By doing so, the organization can benefit from economies of scale and reduce costs, which can lead to increased efficiency and profitability.
  2. Stretching corporate management competences: This refers to the development of new skills and abilities within an organization’s management team. By stretching the competences of its management team, an organization can enhance its ability to manage change, adapt to new markets, and improve overall performance.
  3. Exploiting superior internal processes: This refers to an organization’s ability to leverage its internal processes to gain a competitive advantage. By optimizing and streamlining its internal processes, an organization can improve efficiency, reduce costs, and provide better quality products or services to customers.
  4. Increasing market power: This refers to an organization’s ability to influence the market in which it operates. By increasing its market power, an organization can gain a larger share of the market, improve its bargaining power, and potentially increase profits. This can be achieved through various means, such as mergers and acquisitions, partnerships, and strategic alliances.

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