Single-Product Strategy Versus Diversification Product Strategy

Faculty of Communication and Media Studies

LIB 501 - MANAGEMENT

Essay: Single-Product Strategy versus Diversification Product Strategy

A company or an organization needs to think about whether to have a single-product strategy or a diversification strategy. An organization that pursues a single-product strategy manufactures just one product or services and sells it in a single market. A firm who practice single-product strategy is likely to be very successful in manufacturing and marketing the product because it has staked its survival on a single product, the organization works very hard to make sure that the product is a success. Meanwhile, diversification strategy is where a company operates several businesses to spread the risk. There are two kinds of diversification which are; unrelated diversification and related diversification.

Unrelated diversification is where a company operates multiple businesses that are not logically associated with one another. For example, Quaker Oats owned clothing lines, toy companies and restaurant business. Meanwhile, related diversification is where an organization operates separate businesses that are related to one another. If I have a business, I would rather choose diversification product strategy. This is because; Diversification is a form of growth strategy. Growth strategies involve a significant increase in performance objectives beyond past levels of performance. Many organizations pursue one or more types of growth strategies. One of the primary reasons is the view held by many investors and executives that "bigger is better." Growth in sales is often used as a measure of performance. Even if profits remain stable or decline, an increase in sales satisfies many people. The assumption is often made that if sales increase, profits will eventually follow.

Apart from that, rewards for managers are usually greater when a firm is pursuing a growth strategy. Managers are often paid a commission based...