The progress of an industrial enterprise is normally assessed in terms of volume or growth of sales, profits and return on investment. By setting out one's objectives and gauging the performance which is being achieved it is possible to assess whether the existing deployment of the company's resources will bring about a satisfactory rate of progress. If the desired performance cannot be achieved with the existing deployment these resources may be better utilized in a wider field of company activity. When an organization reaches this situation, some form of diversification may become both necessary and desirable.

Diversification generally means engagement in products, industries, technologies and markets which are new to the company. There are three principal methods of creating an expansion of company activity (1) by means of specialization and the extension of markets, (2) by the acquisition of other firms and (3) by the introduction of a new product range.

A. Specialization

The basis of this approach is the adaption of one's existing product, or products, to suit an increasing number of new markets. New growth is achieved by the acquisition of new markets rather than by the launching of new products.

B. Acquisition

The company diversifies by acquiring other firms to maintain its required return on investment. Here the company uses its existing financial and management skills to develop other businesses which lack these attributes.

C. New Products

New products can be acquired either by internal development, by licensing or by purchase. When a new product range is developed internally, the situation is not dissimilar to that of specialization, but the firm's assets will probably be utilized in a different way or additional assets may have to be acquired for the production and ONLINE MARKETING of the new products. Products which are added by means of investment in the company which produces them usually relate to the firm's existing product range rather than to the qualities of its management.

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