Vanessa D.

Nicol CBME
BSAIS 3A Prof. Fortes
Assessment Task 5
1. There are numerous conditions that would be necessary for a firm to diversify. Diversity is an attractive
strategy at what time a firm is challenging in a nasty industry. In terms of internal diversification, a firm can
market existing products in new markets or in opposite where the new products are market in existing
markets. A business could also pursue an internal strategy by finding new users for its current product and
firm attempt to change market by increasing and decreasing its product price to get the attention of
consumers at different income levels. As well as a firm should firstly have the man force of the required
amount of labor within the company in order to keep the diversification in order and develop. On the other
hand, in the external condition, technological know-how is considered and buys access to new products or
markets. Firm can also perform a cross-business collaboration to create competitively valuable resource
strength and capabilities. Mergers and acquisitions are common forms of external diversification.
2. A firm can achieve cost leadership and differentiation simultaneously, the benefits are great
because differentiation leads to premium prices, and at the same time that cost leadership implies lower
costs. In cost leadership a firm sells its products either at average prices to earn a profit higher than that of
rivals, or below the average prices to gain market share where in the firm can maintain some profitability
while the competition suffers losses and a differentiation strategy calls for the development of a product or
service that offers unique attributes that are valued by customers than other competitors. While the firm can
simultaneously pursue focus but there are some risks such as imitation and changes in the target segments.
Furthermore, it may be fairly easy for a broad-market cost leader to adapt its product in order to compete
directly.
3.
ADVANTAGES DISADVANTAGES
As the economy changes, the spending Entities entirely involved in profit-making
patterns of the people change. Diversification into a segments will enjoy profit maximization. However, a
number of industries or product line can help diversified entity will lose out due to having limited
create a balance for the entity during these ups and investment in the specific segment. Therefore,
downs. diversification limits the growth opportunities for an
There will always be unpleasant surprises entity.
within a single investment. Being diversified can Diversifying into a new market segment will
help in balancing such surprises. demand new skill sets. Lack of expertise in the new
Diversification helps to maximize the use field can prove to be a setback for the entity.
of potentially underutilized resources. A mismanaged diversification or excessive
Certain industries may fall down for a ambition can lead to a company over expanding into
specific time frame owing to economic factors. too many new directions at the same time. In such a
Diversification provides movement away from case, all old and new sectors of the entity will suffer
activities which may be declining. due to insufficient resources and lack of attention.
A widely diversified company will not be
able to respond quickly to market changes. The
focus on the operations will be limited, thereby
limiting the innovation within the entity.