If there’s one lesson learned from the health crisis for many companies, that you should never focus your entire strategy on one product. Completely stalling itself due to paucity of raw material has been a painful experience for many companies. The world is changing at lightning speed and some innovation can make your products and services obsolete overnight. Diversification or specialization, these are options for strategies provided to companies. Both systems have their advantages, however, you will need to find the one that best suits your company.
Define your strategy according to the demands of your goals, the offers of your competitors, your place in the market, as well as the new products that have inspired you.
Diversification?
Diversification is defined by the creation of a new product within a new market. For this, the company has one of two options: vertical integration and horizontal integration. In the first case, the company chooses a field and specializes in it. This applies when you master a particular area. Then you can choose for backward integration or forward integration. The advantage of this technique is cost reduction. At the same time, you can diversify your offers and services. The problem with this strategy is that when the sector is in trouble, there is a huge risk of resource dispersion.
Horizontal integration involves finding new products that are not similar to your current products, but that complement (the technology or goal is the same). The most prominent example is that of SNCF. In addition to its transportation service, SNCF has added services related to accommodation, such as offering accommodation in hotels as well as car rental services.
These two diversification strategies are the most popular, however, you can also opt for group diversification. This strategy involves offering completely different products, as does Virgin Group, which offer cultural products and agri-food products at the same time.
Diversification: An Opportunity
If many companies, both VSEs and SMEs as well as large conglomerates, choose this strategy, it is because it pays a lot. Firstly, it allows you to satisfy all the needs of customers, which ensures their loyalty to your business. Then, the success of the product will bring you substantial profits. By diversifying your products, you ensure the survival of your business. With diversified and diversified products, the losses associated with low-demand products are offset by the profits of products that reach a larger market share. And finally, the variety of products makes it possible to predict the future of the company. According to Vincent Bollore, this is the best way to keep the company quiet for many years.
The success of Vincent Bollore and his group
This year the group is celebrating its bicentenary. Vincent Bollore is the President and CEO of the Bollore Group. In just 30 years, this man has made his family business a big conglomerate present in all the international markets. Initially, the turnover of the company was only 30 million euros. Now, the figures top more than 7 billion euros. His group now employs more than 73,000 employees worldwide. When asked the secret of his success, his answer is ‘diversification’. According to him, “diversifying companies can defy time”. During these years of management, they have never stopped diversifying their products and services. We can give examples of digital television, transportation and logistics, advertising and plastic films. According to Vincent Bollore, there are failures as much as there are successes, but you have to seize opportunities to taste victory. A lesson to be learned?