“Since no business can be all things at once, companies that specialize in one product or service are more efficient than those that offer a diverse product mix.”
From your perspective, how accurate is the above statement? Support your position with reasons and/or examples from your own experience, observations, or reading.
The sweeping claim that offering a diverse product mix reduces efficiency and hence competitiveness of the company does not hold true most of the times. In fact, having a diverse product mix is beneficial to the companies involved and helps them tide over many crises that rock the economy in general, and industry in particular.
Admittedly, focusing all energy on a single product or service can sometimes create an unmatched advantage for the company in that segment where the product is placed. But even then, the growth company envisages in the future may not be possible without diversifying the portfolio of the company.
More details have been provided below.
Firstly, product mix can help a company increase its market share in different segments of the industry it operates in. For example, consider a steel company like Arcelor-Mittal which provides its high-end products to automobile sector and low-end products to construction sector. When recession hit the automotive sector in 2008 and most of the auto companies slashed their production or closed their plants, the company was still able to survive because it had captured a substantial market share in providing steel to construction sector. Hence, the company could survive the economic crisis.
Secondly, one product may not give a company a distinctive market advantage over other companies which have diversified. This is being increasing realized by the companies worldwide which have hitherto been associated with developing only one product.
For example, Google had become the market leader in the search engine segment but it also felt the need to compete in other product categories. So it created a range of new products like Google talk and Google Maps which have made a worldwide impact with its one-of-a-kind features. Even after diversifying, there is no visible loss in efficiency with which its first product has been managed by the company. It has, in-fact, helped in bringing new innovations in its original product.
In conclusion, diversification of portfolio of products or services does not necessarily decrease efficiency or competitiveness of the company. Rather diversification can act both as cushion in difficult times and as a catalyst in bringing innovations to the original product sold.
From your perspective, how accurate is the above statement? Support your position with reasons and/or examples from your own experience, observations, or reading.
The sweeping claim that offering a diverse product mix reduces efficiency and hence competitiveness of the company does not hold true most of the times. In fact, having a diverse product mix is beneficial to the companies involved and helps them tide over many crises that rock the economy in general, and industry in particular.
Admittedly, focusing all energy on a single product or service can sometimes create an unmatched advantage for the company in that segment where the product is placed. But even then, the growth company envisages in the future may not be possible without diversifying the portfolio of the company.
More details have been provided below.
Firstly, product mix can help a company increase its market share in different segments of the industry it operates in. For example, consider a steel company like Arcelor-Mittal which provides its high-end products to automobile sector and low-end products to construction sector. When recession hit the automotive sector in 2008 and most of the auto companies slashed their production or closed their plants, the company was still able to survive because it had captured a substantial market share in providing steel to construction sector. Hence, the company could survive the economic crisis.
Secondly, one product may not give a company a distinctive market advantage over other companies which have diversified. This is being increasing realized by the companies worldwide which have hitherto been associated with developing only one product.
For example, Google had become the market leader in the search engine segment but it also felt the need to compete in other product categories. So it created a range of new products like Google talk and Google Maps which have made a worldwide impact with its one-of-a-kind features. Even after diversifying, there is no visible loss in efficiency with which its first product has been managed by the company. It has, in-fact, helped in bringing new innovations in its original product.
In conclusion, diversification of portfolio of products or services does not necessarily decrease efficiency or competitiveness of the company. Rather diversification can act both as cushion in difficult times and as a catalyst in bringing innovations to the original product sold.
