is to operate in more than one industry. This is crucial if there is a slight chance of an industry failure or decline in the market. This provides protection for a company if concentration is in one market, and the market bottoms out. If a company operates in several different markets, and one should fail, the company has another source of generating revenue. As a source of growth. If a company currently dominates their present market, sometimes the next step is to diversify and begin to conquer a new market. This can help a company gain recognition, power and create a larger brand name and image. Disadvantages (growth diversification):As stated before, there are many disadvantages in diversification. In the case of Walgreens, these disadvantages are the sole reason that they choose not to diversify. The following bullets will illustrate these points: The large amount of capital required. When diversifying, an enormous amount of capital is required to begin operations in the new market. First research must be done to test the market and determine the feasibility of entrance. Research and development is very expensive, and can put a financial strain on the company. Second, the new product line must be created, manufactured and marketed along with the hiring of new employees. Launching a new product line can cause extensive financial difficulties, and Walgreens is currently operating under low debt. Diversification would require more long-term debt. Loosing focus on current success. Launching into a new market takes extensive time and effort. Some companies become so engaged in expansion, they lose the focus of their core competencies. Remaining the number one drugstore chain requires consistent hard work. Walgreens’ position in the market is not to be taken as though it can and will not change. Diversification can cause a company to lose the market position for which they worked so hard to ...
