Strategies for diversification

For companies or countries or companies that have one product as their income earner there is a need to start planning for diversification in a bid to either increase their products or make them more efficient at the production of the product that they have at hand. Diversification can come in the form of collaborative arrangements with other organizations that could help one company produce a high quality component of the product that they produce. For instance, a computer company could buy processors or mouses from another company that has the capacity to produce them better. Some companies often venture into the production of products that have no link to what they were producing before. The Flour Mills of Nigeria recently went into the production of fruit juice in powder form. The intention of the company was to break into the soft drink market which is ever expanding and appears to be very lucrative in Nigeria.
Once a company goes into varying businesses it needs different strategies at the various business unit levels to help leverage its competitive advantage. That means it would look for its strength in the product production and use it to its advantage to try to outdo the competition.
Before diversification there are somethings we ought to consider as businessmen:
1. How attractive or lucrative is the new business/product? Does it have a wide range of strong customers who would be willing to try new products? What are the cost involved in business at entry level?
2. Does the cost of entry eat into future benefits. Would we spend so much money setting it up that it would be impossible to make our return on investment as soon as possible? Can the break even period be measured?
3 There ought to be a competitive advantage in the new or acquired business from the outset. It could be a distribution network, better price,  or even uniqueness of the product.
Bringing significant advantage to the competitive environment is key to success of the business. This would be what the new business strategists would leverage on.
Sometimes the diversification could be a joint venture. Here's how to know when a joint venture is desirable:
1. When there is a need for strong portfolio management which requires another company making an intervention
2. When restructuring is required in terms of the managerial arrangement which could lead to success of the company or the product in consideration.
3. When there is an urgent need for a skills transfer
4. When certain extraneous activity that can not be carried out by one business unit is required for success.