How important is a company’s core competencies when it looks to diversify its business? What roles does strategic business planning play in ensuring the company has chosen the right market to pursue, and that its new business venture will succeed? If your company is looking at diversifying its business, and is unsure of how to proceed, don’t despair. Strategic business planning is simply enacting plans that cover the company’s overall goal in terms of where it wants to go, and how it plans to get there.
To diversify a company’s business is akin to minimizing its risk. It’s the right thing to do given the recent global recession. While no industry was untouched during the last couple of years, it’s fair to assume that those businesses with multiple revenue streams faired better than those that didn’t.
Unfortunately, many businesses are confused as to the steps that are needed when pursuing a new market or industry. Surprisingly, the steps aren’t that difficult. However, it does require both effort and time and the willingness to see your ideas to their successful conclusion. So, for companies looking to diversify their business into new markets, what are the essential steps?
1. Identify Your Company’s Core Competencies
Every company has a set of core competencies. These could be a company’s strengths in manufacturing, its strengths in design & engineering, its sales & marketing prowess, or even its vast distribution channels. What’s needed is an honest assessment of your company’s core competencies. Identifying your company’s competencies simply means to identify your company’s strengths. What works in your current market might surely work for another, provided you’ve done a proper assessment of what your company does well and why it does it well.
A value chain analysis is an ideal tool to help you define your company's core competencies. To learn more about applying this strategy, please go to: Your Value Chain Defines Your Value Assertion: B2B Marketing Essentials
2. Research Complementary Markets
The next step is to research those complementary markets where your company’s core competencies will make for an easier transition. It’s about matching your company’s strengths to the requirements of the new market. This takes both time and effort and the impetus must be on choosing several potential markets, as the best way to choose the ideal market, or industry, is to be able to compare one versus the other. For instance, which market has a higher growth rate? How do creditors see customers in that market – high risk or stable? Having multiple options allows your company to decipher which industry represents your greatest opportunity.
3. Use a Market Feasibility Study
Regardless of whether it’s a new start up about to enter its new market, or your business trying to pursue a complementary market, nothing should proceed without first having done a market feasibility study. Simply put, the market feasibility study is far more important than the business plan because the feasibility study aims to measure the overall health of the market and answer those aforementioned questions about its growth rate, the types of customers in the market, whether they’re credit worthy or not and ultimately, who the company’s future competitors are and how they approach business.
4. Adopt Strategic Planning Initiatives
To successfully enter a new market requires you have the proper strategic plan. Many companies assume strategic business planning to be a long, complicated and confusing process. Where companies go wrong is when they adopt separate individual plans for each of their individual departments, without linking those plans to one all encompassing goal. This does nothing more than create conflicting interdepartmental objectives and is the reason why one department’s success means another must fail.
For strategic planning to work involves starting with one all-encompassing mission statement, or goal, and cascading individual plans that achieve the company’s overall goal. Start from the mission statement and progress from there. To read more about strategic planning, please read: How Can Strategic Planning Help Your Business Grow?
The SWOT and TOWS analysis are fantastic strategic planning tools.
Now, these four steps are merely guidelines. Each and every one of these steps involves in-depth analysis. However, the basic principle applies. Identify what your company’s core competencies, search for a market where you can use these strengths, assess the market’s health with a feasibility study, and then adopt strategic planning initiatives that clarify how your company will approach its new market.
If you’ve decided to diversify your business, then it is incumbent upon you to put your best foot forward. That’s the most important first step. The rest simply involves understanding where you want to go, and how you’ll get there. In the end, it means putting a plan in motion and having the follow-through capabilities to see that plan to its successful conclusion.
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