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Product Diversification Essay

2531 words - 11 pages

Caroline Daoust-Larente 6609112 F12_COMM210N Illana Amar 9762655
Émilie Dufort 6598277
Dominique Reda 6675026
Tina Tailor 9372105


Michel Greiche
October 17rd, 2012

owadays, the business world is highly competitive. Companies strive to rise above their competitors and attract more customers. Some succeed while others fail. Many companies rely on product diversification, which can been considered as “any modification of a product that serves to expand the potential market which involves creating a new customer base, which by definition ...view middle of the document...

A perfect example of this would be People’s magazine. While they were not mainly focusing on teenagers, they had observed that many of their buyers were in fact teens. Knowing that the market potential of their original product (People’s magazine) could be expanded, they came out with a new product simply for teens, who might not have considered the original product, which is now known as Teen People.

Product diversification is also a very practical way of ensuring longevity and sustainability. The Vice President of a communication company in Montreal thinks that in order to ensure financial stability, constantly replenishing product inventory with newer ones is critical. Reinvesting product development within the company allows sustainability. A company with a large product variety could attract residential customers, small medium business customers as well as large corporations. These types of customers need different services and special care. By having a good customer service, it ensures a long length association between the two parties, thus, maintaining customer loyalty.

In the past, RIM’s focus was on making secure products for those in the business world who needed an electronic personal digital assistant and phone. With its growing popularity amongst the general population, they went further with their products by creating low-end devices to satisfy the needs of the younger crowd who were looking for a device with which they could communicate more easily. By creating a wider range of products, they not only went  on to satisfy the needs of existing consumers who were not their target market, but also obtained a new customer base. The latter possibly never thought of buying a RIM product with the idea that it was not suitable for them. Similarly, Rogers decided to attract a wider range of clientele by offering a special, easy to use device for elders who were already looking to purchase a cellular device for emergencies. This enabled Rogers to acquire a new client base who originally thought past devices were too complicated for them.

In addition, let’s not forget that other types of companies cannot diversify because they are specialized. For specialists in a certain industry who don’t diversify and rely on one product line, there is a huge financial risk. For the owner of a specialized pharmacy in Quebec, being able to sell only a specific number of products can be dangerous: it means that, if Santé Canada retracts her right to sell a certain product, the financial loss is more important than if there were many products available for sale. This would also lead to an eventual loss of clientele. Although they are penalized for their inability to diversify, these specialized companies have an advantage because very few companies have the same knowledge to produce the same products as they do. Therefore, they have fewer competitors and a very specific and dependent clientele.

For a software consultant, another issue arises...

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