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Running head: Diversification in firms Diversification in firms: Firms that diversify are always running away from something Insert Name Insert Grade Course Insert Tutor’s Name October 14, 2011 Part 1: Firms that diversify are always running away from something Introduction Business organizations in the contemporary world are faced with serious challenges.
The needs of the customers constantly changes and the firms are often challenged to keep pace with the changes. In order to reduce these risks, a firm needs to diversify its portfolio of stocks (Solnik, 1995, p.89). In the current market, firms should not only focus on how to produce their goods and services and avail them to the clients in the market. Rather, the market dynamics require the firms to develop corporate strategies and respond to these market forces will providing balance to the objectives and goals of the firm (Thinking Made Easier, 2011). In response to the changing market trends, some firms have opted to diversify their operations. Diversification is a business strategy that has experienced significant growth in the recent past. Diversification involves the production and delivery of new products and service. It is mainly aimed at ‘increasing market profitability, smoother earnings, and greater capital markets and accumulating diverse expertise in diverse environments’ (Thinking Made Easier, 2011). However, it may be noted that these objectives of diversification are not often met. ...
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