Advantages Of Unrelated Diversification Case Studies Examples

Averts the risk associated with the core business

Outsmarts competitors of the first business
Each business can support the other directly or indirectly e.g. some home equipment may move faster than the rest of products.

Can help avoid seasonality in the business

Disadvantages
Requires excellent managerial skills
Very costly. It needs a lot of capital for staff, premises, etc.

Divided attentions may reduce total revenues the business gains.

Advantages of forwards integration
It would increase the sales by taking the goods to a larger customer pool
There shall be greater customer feedback
Absence of middlemen may increase the revenues of the firm
Disadvantages

It increases the business risks

A slight change may affect the business due to the interdependent nature of forward integration
Pros of focusing on core customers
The firms receive better feedback than when not focusing on customers
The firm can understand the desires of the customers better and hence make corrections quickly leading to growth
Cons
Innovation lag since focusing on the customer reduces the focus on the products.
It takes long to gain from focusing on customers. Such is due a slow growth of the growth of the customers. Customers do not become loyal immediately. It takes a lot of time.

Pros of backward integration

It lowers distribution cost
Meets the demand of the resources in running the firm
Increases the profit margins of products
Increased quality control of the products
Cons

May involve a lot of capital

There is an increased risk in the event of the unfavorable changes affecting he current brand
The company loses the opportunity to buy from efficient suppliers.
Advantages of market Penetration
Increase sales
Improve the competition
Leads to improvement of the products
Disadvantages

Very costly

May increase competition as other firms also advertise to make them relevant to the market