What are the different levels of diversification firms can pursue by using different corporate level strategies and what are the advantages to diversifying their operations?
There are 3 different levels of diversification that organizations may pursue by using different corporate level strategies. They are,
Low-level diversification: It covers both single and dominant level business strategy. Here about 70% to 90% of the revenue comes from the single business unit. In such business strategies, organizations generate their maximum revenue from their core business areas.
Moderate to high-level diversification: It is the strategy where organizations use related diversification strategy for their business. All the businesses in these cases are linked to each other.
Example: General Electric
High-level diversification: It is applicable to organizations where they use unrelated diversification strategy for their business purposes. Companies that generally use such strategy are known as Conglomerates.
Advantages to diversifying:
1. An organization gains financial advantages from diversifying its strategies.
2. A positive result of diversifying your strategy can be an increase in market share. By introducing new products, exploring new regions or targeting new groups of customers, one can expand their customer base.
3. Whether one would measure growth in terms of the number of employees, profits or sales, a diversified strategy can help them get there.
4. On reaction to diversify is for companies to protect them from the risk of failure.