Recession Survival – Is Diversification The Key?

26/01/10

By Josh Hall, simplybusiness.co.uk

Some business advisers have suggested that specialisation is the best route to survival during the recession. Making your company indispensible in a specific niche certainly has its attractions; it is easy to imagine that becoming the ‘go-to’ company for certain requirements would be a guaranteed route to success.

But what if those requirements no longer seemed so important to your customers?

Many previously profitable niches are being closed, with businesses finding there is simply not enough custom to sustain themselves. As a result, business groups like the Confederation of British Industry (CBI) are suggesting that specialisation should be put...

...on hold during the downturn, in favour of diversification.

Why diversify?

The CBI has suggested that larger businesses are likely to cope better with the downturn because they may already be spread across a number of sectors. There is certainly some truth in this. Consider the Virgin Group — surely one of the archetypes of successful diversification. The collapse (or management buyout, depending on your point of view) of Virgin Megastores UK was easily worn because the Group’s exposure is spread across a vast number of sectors.

The same principle can be applied to businesses of virtually any size. Diversification is an excellent way of dealing with a rapidly changing market.

What does diversification involve?

Diversification does not have to involve developing completely new products, or entirely changing the focus of your company. Rather, you should be looking at opportunities for expansion that utilise your existing skills and infrastructure.

Entering a new market as an established company is significantly easier than launching your first product. The basic apparatus of business will already be in place; the administrative elements such as accounts and IT will already exist, and can be leveraged for use in other markets. This enables you to produce new offerings comparatively quickly.

Furthermore, you... continued on page two >

 

 

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