As a way to increase the success of economic activity, on the national and world markets, the diversification of production has long been considered as one of the most productive, and therefore widespread. In its most general form, diversification of production is a specific and large-scale strategy and practice associated with a fundamental change in the key parameters of doing business and commodity profiling of the manufacturer. As a rule, when implementing this strategy, the company abandons the initial or previous lines of business and moves on to fundamentally new types of commodity production. The main reason for diversification, as a rule, is the desire to move away from excessive dependence on one product market and reorient the activities of the enterprise to other, more promising markets.
As the local reasons for diversification, one can consider the stagnant state of the traditional market in which the company is present, the desire to obtain additional financial benefits and preferences, and the desire to reduce the threat of various risks associated with the economic activity of the company.
Diversification of production, as a rule, is carried out on the basis of the implementation of certain scenarios - strategies, during which the desired transformations are realized. Three such strategies have become the most common in modern practice:
1. The strategy of centered diversification, or as it is also called concentric, involves the use of the potential of an already created business to expand the company's growth opportunities. As a rule, this strategy is associated with the expansion of production, the development of the production of new marketable products, and the provision of new types of services.
2. The strategy of horizontal diversification is carried out through the development of fundamentally new products and its offer in the markets instead of the old. With such a strategy, the calculation is that new products will be consumed by previous customers, and for this, in this diversification scenario, a thorough marketing assessment of the consumer market is carried out and its parameters are compared with the company's capabilities.
3. The essence of the diversification strategy, called conglomerate, is the physical expansion of production potential, primarily due to the resources of the enterprise, not directly related to production activities and the technological process. This is the most difficult option for diversification, requiring the attraction of additional financial resources or investments, conducting extensive advertising and marketing events and highly qualified personnel.
In some sources, risk diversification is considered as an independent diversification strategy. Such diversification of production involves the redistribution by the company of its assets across various financial institutions and the transformation of these assets into a variety of financial instruments.
The most striking and almost textbook example of the successful implementation of a diversification strategy is the concept implemented in the 90s of the last century by the Finnish company Nokia, which produced and supplied toilet paper. Moreover, the Soviet Union was the main consumer of the company's products at that time. As soon as economic problems began to increase in the USSR, Nokia management decided to reorient the company's production facilities to the production of mobile phones. A successful company policy, a competent diversification strategy, allowed Nokia to take a leading position in the mobile communications market and get ahead of the previous leaders of this market - Ericsson and Motorola corporations.