The current economic climate presents challenges to businesses of all sizes. The effects of the recession have been widely felt, and in many cases, small businesses have suffered the heaviest impact. The economic downturn has seen a reduction in consumer spending, and in turn businesses are often hampered by limitations on their own resources. Seeking growth for one’s business at this time can therefore seem a challenging task, in particular for small/medium businesses.
However, the picture is not entirely bleak, and many small businesses are striving for growth despite the challenges presented. Diversification is one method by which a business may seek such growth. This can take various forms, for example, a business which provides products to consumers (such as a wholesale gift supplier) opting to diversify its stock.
Of course, choosing to diversify a business is not without its challenges, and the pressures of the current economic climate mean that few can afford to take chances unless they are careful considered.
Arguably the most significant risk for a business which is seeking to diversify is the possibility of alienating their existing client base. Unsuccessful attempts to diversify could potentially dilute the company’s identity, which may be off-putting to current clients, and unattractive to potential new clients. For example, selecting a range of products which seem incongruous may come across as something of a ‘mixed message’, and could create uncertainty from the consumer’s perspective. Companies with stronger identities are likely to be selected over those which seem less sure about their place in the market. It is therefore important that businesses seeking to diversify do not lose sight of their core values, in the interests of both retaining old customers, and attracting new ones. Additionally, businesses should conduct market research into the areas they wish to branch into, and should develop a clear strategy for expansion.
However, while deciding to diversify a business can be a risk, it is a risk which can certainly pay off. To continue with the more specific example of stock diversification, supplying a wider range of products clearly holds the potential to gain sales revenue from a wider range of customers. Such diversification could entail selling a new selection of products with the aim of attracting a new base of customers, or selling new stock to the business’ existing customers. For example, a gift store which sells products aimed at women may decide to introduce a range of gifts for men. The introduction of this new range of products could potentially both attract new customers, and appeal to existing customers who are interested in purchasing a wider selection of gifts.
Additionally, a business which successfully diversifies its stock can be left less exposed by changes in the market. For example, if a company supplies only one type of product, and that product falls out of favour with consumers, the impact on the business could be disastrous. Diversification can help to safeguard against such risks.
This helpful article was provided by Lucy Hunt, a keen technology and business blogger currently writing on behalf of Hill Interiors, wholesale gift suppliers based in Yorkshire.