Why and How to Diversify

by George Steiner



Diversify or, and diversify by plan, are two managerial imperatives. In the long run, a firm that does not diversify will fade and die. Not every manager understands this. Among those that do, however, just how successful diversification can be accomplished is not always completely clear. This article seeks to distill from this massive and fragmented record those basic principles which a manager should use to build a detailed diversification procedure to fit his own particular case. At the outset, diversification should be defined. Diversification to me means entry into new product lines, processes, services, or markets. If one thinks of specialization in terms of individual-industry categories in the official U.S. Standard Industrial Classification Code, diversification is activity by a company in two or more of these classes. The range of diversification may be from new products or services in new markets to the extension of existing products into new markets. The states-of-the-art today, however, includes the basic operational framework for, and basic principles of governing, successful diversification planning. While considering both, this article has emphasized the latter.

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