The saying, ?don't put all your eggs in one basket? is applicable to many aspects in one's life but more so in business. There are a lot of uncertainties in business that the saying is indeed a sound advice to spread any possible losses, but then it could also mean less profit in case the initial major investment hits it big. The main problem is how, when and where to put your ?eggs?.

In business, diversification is equivalent to the saying ?don't put all your eggs in one basket?. Business growth is the main reason for most of the changes in business like diversification so it must be based on thorough study because there are risks involved.

Diversification can be in the following ways:

* Introducing new but related products or services to the existing market

This gives more choices to the existing customers, like new flavors, new styles of the existing products. May result to more customers like those who did not patronize the product or service before because they preferred something else.

* Expanding the market reach of the present product or services lines.

This is the expected move if the present market is already near its saturation point. Reaching out for a wider market is bound to increase sales volume.

* Introducing new products for a new market

This is the combination of the first two ways of diversification. The recommended move if it comes out through research that new products are needed in a new market.

When to Diversify

Diversification carries a lot of risks so a thorough study should precede any move. The decision to diversify maybe based on any one or all of the following:

* Thorough and reliable research on the potential market and potential customers of the products or services to be offered. The result could help guide any possible modifications on the product or services to make them more matched with the customers.

* Effective product development.

Any new products or services should be tested and modified accordingly based on the test result. Business is not guess work.

* Availability of resources to carry out the necessary research, product development and product /market testing. Lack of resources could delay the completion of the product or services to its marketable level

* Availability of resources to cope with the results of diversification. Hopefully, the resources needed are for the increase of demands for the products or services as a consequent of diversification.

There is no single rule in diversification. When, how where to diversify depends on a lot of factors that come out of a though research and careful analysis of data.

Diversification is supposed to reduce the risks in investment, if the proper steps mentioned above have been taken.

Copyright ? 2007