Question

What are the risks of implementing diversification strategy? What should we pay attention to?

Answer 1

A diversification strategy is a growth strategy which is used by several companies to grow and expand their business.

In diversification strategy companies try to capture new markets to sell their goods and services.

Diversification strategy is usually high on risks because when companies try to enter in new markets or try to capture new countries they usually don't have enough working experience with that market. So they put themselves into huge Risks.

Also along with this problem comes the problem of allocation of resources because it's difficult to allocate them in a different country or market and to regulate them.

We should pay attention to the research before entering into a New Market. A deep study should be done in order to tap the opportunities of that market and to male profits.