Diversification in an Organization

Diversification has proved to be a very reliable security method for organizations in the modern world. Diversification as I understand is having different investment scopes within one portfolio. This concept creates different levels of opportunities for the main organization and reduces the risk of losing business. It also increases ways to balance any lose. Investing across borders is more effective and yield more benefits. Ex: The recession that hit the US did not hit equally strong or in the same time in Asia. Therefore companies who have invested in the US and Asia had the Asian business running at a safer level and were able to balance the issues with the profit from Asia. Examples for companies that have succeeded with diversification are:

* Virgin - (Virgin Blue, Virgin Mobile, Virgin Airlines, Virgin Broadband, Virgin Money, Virgin Atlantic, etc) the Virgin group has around 70 specialized companies around the world.

* Woolworths/Safeway - Woolworths supermarket, Woolworths Liquor, Dan Murphy's (Liquor), Big W (Department store), Safeway Petrol, BWS (Beer, Wine, Spirits), Dick Smith Electronics, Greengrocer (Online grocery shop), Tandy,

* Walt Disney - Animated movie production, Disney World, Walt Disney World Hotels,

Diversification is a strategy to increase markets, demands and profits. It also has a strong relationship between performances. We all know about the Ansoff Growth Matrix, which is a tool that helps businesses to identify their growth in relevant to their products and market.

According to the Ansoff Matrix diversification takes place when there is a new product in a new market. There are three types of diversification strategies.

* Concentric Diversification - Technologically similar companies

* Horizontal Diversification - Products are not always technologically or commercially unrelated.

* Conglomerate Diversification - No technological or commercial relevance.

I would like to take Woolworths as an example. The company is one of the major "Group of Companies" in Australia. Woolworths is based on Horizontal Diversification. All the companies are diversified along the super store concept. They take the advantage of customer satisfaction on Woolworths supermarket qualities to go forward with the other companies. Walt Disney was extremely popular with their ever famous cartoon characters. And they took this customer satisfaction level to expand their business, but remaining in the same industry, Entertainment. Diversification is the most riskiest strategy of the Ansoff Matrix (Online). The risk of stepping in to an unknown market is extremely great. The organization faces with challenges such as branding, attracting customers to the new product. If the new dimension does not suit the market, the existing