When a company has different products for different target a

\"When a company has different products for different target audiences it creates a diversity that has its benefits.\"

What are the benefits and risks of diversifying business? (150 words and no plagiarism) Use Websites to write in your own words.

Solution

Below are the benefits and risks of diversifying business -

Benefits

1. The firm gets access to new markets and new consumers through diversification into markets as well as new products.

2. Increased revenue from the new markets or products leads to compensation of losses in the existing products

3. Reduction of dependency on few customers/clients as there are new customers available

4. Optimization of risks due to spread of business into diverse markets/products.

Risks

1. Too many products offered by the firm might result in cannibalization if new products are launched in the same type of product lines.

2. Firm might lose focus on its core competencies or products if they diversify heavily.

3. It might incur losses in its non-core products due to lack of skilled resources that produce quality products.

4. It might result in brand damage due to the confusion the firm creates in the minds of consumers