Abstract
The paper considers the problems of choosing strategies for diversifying companies. It was revealed that in corporate practice, there is a certain tendency towards moderately diversified companies with related business lines (relational diversification). The authors analyzed a set of four main growth strategies: market penetration; market expansion; product innovation, and diversification. Their advantages and disadvantages are identified. Depending on the degree of risk appetite, three types of diversification were studied: horizontal diversification, vertical diversification, and lateral diversification (diagonal diversification). The reasons for diversification are analyzed, which may lie both in the environment of the company (exogenous) and within the company (endogenous). The diversification of stocks and monetary investments is considered, the advantages of this process are assessed. It is revealed that despite the fact that the advantages of portfolio diversification are undeniable, due to its complexity, it is almost impossible for investors to independently create effective security portfolios. The need to take into account systemic and non-systemic risks in portfolio diversification is proved. The ways to diversify the portfolio of stocks are described. It is concluded that in companies, regardless of whether they are expanding their services or opting for long-term product diversification, in both cases, an entrepreneurial restructuring plan can only be implemented under certain conditions.
Highlights
The term “diversification” is very often used in business management, in the field of strategic management, and in the field of banking and stock exchange, to describe the combination of an investment portfolio, for example, with different stocks.Diversification strategies can carry additional risks
There are three types of diversification [2,5,6] according to the Ansoff Matrix, depending on the degree of risk appetite (Fig. 1): Fig. 1
Horizontal diversification: expansion of the assortment due to the original product, related product categories that cannot be compared in the same industry
Summary
The term “diversification” is very often used in business management, in the field of strategic management, and in the field of banking and stock exchange, to describe the combination of an investment portfolio, for example, with different stocks. If the diversifying company is weak and inexperienced, it may not be strong enough to master newly built or acquired technology. If a diversifying company is strong and independent, it may overestimate its own capabilities and ignore clues that indicate the risk potential of a diversification decision. Empirical study has led to conflicting results. Each individual company must weigh which of the reasons presented here are of particular or lesser importance to it [2,3]
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