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Advantages of Diversification

The advantages of diversification strategy are as under:

(i)    Diversification offers greater scope for growth and profitability as compared to intensive growth strategy.

(ii)    Because of diversification, the business risks are scattered. New products are added. Loss in one product is made good by profit in other products.

(iii)    The existing facilities such as machines overheads, marketing organization, etc. are fully utilized.

(iv)    The firm producing a large number of products can absorb the shocks of business cycles. For instance, if there is a depression in the sale of a productions, etc. the firm will survive if it is doing good business in other products.

(v)    The growth is systematic and does not affect the normal functioning of the firm.

(vi)    With more products, greater resources and higher profits, the diversified firm is more competitive than a single product firm.

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