Diversification is a marketing strategy that lies in expanding market segments or sales volumes by introducing new product lines. At a business level, it implies creating new industry departments entering the manufacture of a new product. It can also imply entering business whose goals are beyond the existing business strategies.
The diversification strategies form a part of the product/market matrix and depend on the development of new product and market. Therefore, the phenomenon specifically reflects customers’ perceptions, rather than managers’ techniques. By introducing diversification using introducing a new product, it is possible to stimulate customer demand and foster product innovation.
Diversification also involves internal development of new market segments and productions, firm acquisition, and cooperation with a complementary company. Distribution and import of product lines provided by another firm is also a part of diversification technique. In case a firm needs to sustain a competitive advantage over other firms, it should encourage innovation and creativity, as well as create prospects for product development and advancement.
Apart from the diversification strategies, there are other three strategies contributing to entering a new business unit. These strategies include market penetration, market development, and product development. These strategies are traditionally accompanied by similar financial, technical, and commercial resources that are applied for original product lines.
Thus, market penetration takes place when a company enters a market with currently existing products. In this situation, the organization should gain a competitive advantage over other company’s customers, or attract new target audience by the same product. In this respect, advertising campaigns and reconsideration of target buyers are involved.
The strategy of product development implies the investigation of existing markets for introducing a new product. To penetrate the existing market, it is purposeful to generate new idea through a SWOT analysis, market trends, competitive environment, and corporate strategies. Idea screening is the next stage of the new product launching.
This is of particular concern to target market analysis, growth forecasts, and possible competitive pressure. Sales and marketing trends are also of great importance in promoting a new product. Finally, a market development strategy implies searching for new markets to promote existing products.
The main scope of this growth strategies lies in attracting new buyers and developing the currently existing market segments. In such a way, it is possible for an organization to expand its potential market through new geographic locations, demographic segments, and psychographic dimensions.
Sony Corporation resorts to diversification strategies by adding new businesses whose value contains value coincide with the strategies introduced by the present business. Therefore, the company’s diversification strategy provides a precise focus on handling new market development.
Also, the resources involved into the strategy allow Sony to deliver a competitive advance because such a strategy is designed for a long-term period and, therefore, other company will have difficulties in copying the marketing approach. The approach used by General Electric implied a conglomerate with many companies act separately. At the same time, they provided support for each other.
As a result, the company experienced significant challenges and recession. Therefore, better cooperation strategies of diversification could have provided GE with better perspectives for future development. In particular, the failure of one product development could be replaced by other organizations’ production, which would enhance the overall competitiveness of the venture.
Integration of companies
Sony Ericsson is a world known electronic company whose success has occurred after the development of cooperation with a mobile phone company. Previously, the company failed to capture large market segments and target audience because their venture was nothing more than a logo accompanying mobile products that have to compete with not less famous brands.
However, integrating the camera into a mobile phone has created a new product and expanded a new market segment, practically affluent young adults. Hence, a diversification strategy, particular launching a new product and unique ideas allow the company to penetrate both the existing markets and create a new market segment.
Using technological advancement, Sony Ericsson has managed to introduce innovation and uniqueness that attracted young and wealthy customers. As a result, a complex of new market opportunities and new production lines emerged allowed the corporation to achieve corporate success and bring in significant revenues for the company.
To promote a new product to a new market, the company resorted to concentric diversification. Hence, the company searched for new products that could have both marketing and technological synergies with the currently existing product lines to appeal to a new focus group.
What is more important, Sony Ericsson has managed to cover the market that had not been covered before. In particular, selling mobile phones with a built-in camera for wealth youth is a poorly investigated market because all the companies strive to attract consumers from middle-class layers by making their products more practical.
Competing with Other Mobile Phone Companies
Sony Ericsson corporation has a great number of technological and innovative advantage of other mobile products. To begin with, the company was the first to present the Walkman model, a music-centric device allowing consumers to listen to music while traveling and use the device like a mobile phone at the same time. In such a manner, the company has managed to create a new image of their brand.
Constant cooperation with new companies and businesses, the company is in the active quest for new opportunities for widening the market segment and introducing a new product line by integrating mobile phone functions with other devices an techniques. Constant innovation and integration of technologies, Sony Ericsson, was among the first to introduce multifunctional devices for the advanced and innovative young population.
As a result, the company has managed to capture a wide audience that is interested in unique and multifunctional devices that would enhance their image. Because other mobile phone companies focused on developing already existing product and attract similar market segments, they failed to sustain a competitive advantage and produce devices that would be in high demand among their buyers.
Constant development and ability to predict the market potential, therefore, contributed to the further successful performance of Sony Ericsson. More importantly, the company has managed to fit the current globalization tendencies that are strongly associated with the era of Internet penetration because of more and more market segments capturing focus groups interested in virtual space.
Mobile products, therefore, have also introduced practical trends, along with functionality and uniqueness. In a highly competitive environment, Sony Corporation has managed to provide greater options for their customer to meet their needs and concerns. Most of the consumers become loyal to the existing brand because of the quality and innovation being the main features of the company.