Diversification – expansion of products range and reorientation of sales markets, development of new types of production in order to increase production efficiency, obtain economic benefits, prevent bankruptcy. A simple explanation of this term may be the well-known proverb “Do not put all the eggs in one basket”.
Today, every second entrepreneur or business owner strives for new growth opportunities of the company, increasing the profitability of the business. These desires intensified many times during the crisis. Then it became clear: in order to survive, it is necessary to have several directions in business, in other words, it is necessary to actively diversify it.
Diversification as a modern concept in its most common definition is a risk reduction strategy by adding assets, products, services, customers, markets to the company’s portfolio.
For example :
Diversification of production – expansion of the range and types of products produced by the enterprise, development of new industries and technologies – technological consulting, creation of new products, business projects.
Related diversificationis the formation of new areas of the company’s activities related to existing areas.
When making related diversification, companies expand their operations beyond current markets and products, but are still operating within existing capabilities or within the existing value network.The main goal is the acquisition of a pronounced synergistic effect, within which the result of the effort is significantly greater than the individual benefits from each sector or activity of the enterprise involved.
Unrelated diversification is a new area of activity that has no obvious links to existing business areas.
An unrelated type of diversification is the use of existing funds and capital to develop an entirely new industry direction that is not related to past activities.
Creation of business projects, creation of new directions.
An example of successful related diversification:
Initially, the company specialized in the supply of rolled metal products, but the drop in marginality forced to look for new ways of doing business.
First of all, the enterprise diversified its activity through construction, having begun to build residential units. The second direction was the production of concrete: the company built its own concrete plant, and is currently preparing the launch of another high-capacity enterprise. And the third direction of diversification is the sale of ceramic tiles, which is currently the most common type of finishing materials. The margins for deliveries of this product to private consumers reach 50% -100%.
These areas allow the company to maintain profitability of operations, as well as to feel stability within unstable market.
Before the start, the owner needs to properly assess himself, his capabilities and strengths. You can “dig in” if you participate in all projects at the same time. In practice, few clients succeeded in conducting several projects independently and at the same time soberly assessing the situation and taking decisions that are right for the development of projects. Therefore, before making a strategically important decision regarding the diversification of your business, our experts advise firstly – to understand whether you will be able to assume all the projects or, nevertheless, delegate your powers to someone else. It is also important to remember that diversification lies in the idea. Ideas must be different. But there is no substitution of one product for another, but an extension of the menu: for example, today we were a meat restaurant, and tomorrow we decided to become a pizzeria. Now if we open different restaurants: Japanese, Italian, catering, – then it will be diversification. The same thing happens in modern information technologies – the market of the 21st century.
Mixed diversification. The most common method of companies’ development is mixed diversification, which can be implemented in several ways:
Filling the company’s portfolio with a large number of strategic business units, related to both related and unrelated type.
Division of production and administrative resources between a group of unrelated directions, each of which develops according to the principles of related diversification.
A particular case of mixed diversification is the merger of companies with different strategic business units in order to develop a method for further joint development precisely within generalized improvement.
Another key aspect is the search for funds. Everything requires resources.
We give preference to projects with an interesting, unique idea, backed by a business strategy that corresponds to modern market conditions.
It is very important to understand the market: to realize its needs, to know competitors (both direct and indirect, especially if the idea is new), to realize what tasks the project solves.
The existing well-functioning business should know its competitors well and have a clear tactic today and a well thought out strategy tomorrow.
Diversification of the investment portfolio is the distribution of investments by different financial instruments. Its meaning is that the risk in the portfolio of investments in different financial instruments is less than the total risk of individual portfolio instruments. At the same time, the amount of the portfolio’s income remains equal to the total income of all instruments, of course, taking into account their share in the portfolio.
Diversus Group considers the companies and services, realized or being at the development stage, having a transparent financial model, existing businesses, the next step of which is diversification, to be the most promising for investments and financial support.
Our investment focus lies in the following areas:
online services targeted at mass users;
IT platforms of new generation;
high-tech industries with export potential;
products and services for B2G and B2B markets.
We actively participate in the creation of a business model of projects and existing businesses, determine the direction of their development, help in finding talented specialists, strategic partners.
We actively participate in a business model creation for start-ups and existing businesses, determine the direction of their development, and help in finding talented specialists and strategic partners.
We consider requests for investments and invest in the most worthy projects, and also attract co-investors, if the project requires large investments. Our partners are not only Russian, but also foreign investment funds, banks and private investors that provide means on terms of credit, venture investment, project financing, and equity participation.
Acting as mentors and participants in project development, we are interested in its growth from early stages to successful business. We provide more than just investments – we create, finance and grow businesses.
We provide more than just investments – we create, finance, grow and develop business.
Properly conducted business diversification allows the company to get a synergy effect when 1 + 1 is more than 3.