With a related diversification strategy you have the advantage of understanding the business and of knowing what the industry opportunities are.
Consider these in the context of integrating benefits into a much stronger and higher value proposition for your customers.
So, does adding the new products or services provide you with a leveraged opportunity?
For example, if you are a commercial printer and you add creative and packaging services to your offering, you will have a leveraged diversification opportunity.
By combining services for the same client you will, not only, have saved your client time and money by enabling the client to ‘shop’ in one-stop. Crucially, you will have benefited from being part of the work process from concept to delivery and keeping greater control on the overall relationship.
Whilst in principal this can appear extremely advantageous, a number of related acquisitions do fail to provide the benefits or returns originally predicted.
This is usually because the diversification analysis under-estimates the cost of some of the potential issues: change management, integrating two cultures, handling employees. layoffs and terminations, promotions, and even recruitment.
Equally, the diversification analysis might over-estimate the benefits to be gained in the synergies
The answer is to be practical, pragmatic and not over influenced by the seller. Equally, ensure the legals are water-tight if the seller is part of the ongoing business and be conservative with forecasts.
The alternative is to select trusted partners and trial the offerings through sample marketing with the customers you hold the strongest relationships with.
At the Business Board we can recommend trusted trade partners from which to source additional services, to continue our example within the print industry :
• Creative and Graphic design -Contact us for recommendations in your area
• Data – try Experian on 0845 234 0391; Experian website
• Direct mail – try Herald Chase on 0118 9474888, Herald Chase website
• Promotional items – try Jenova on 01491 411565; Jenova website
• Office stationary – Contact us for recommendations in your area
• Social media – try Our Social Times on 0845 463 1435; Our Social Times website
Other suppliers may be found on our Trade Directory
You can add significant value for your client, your proposition and your bottom line through related diversification
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