Diversification is important in every dynamic organisation.What circumstances would make it necessary for a company to diversify?

Diversification refers to an organisation’s move to scale-up its presence through the introduction of new products in new markets

a) Circumstances that may render it necessary for a company to diversify include:
• The need to achieve operating economies
• Growth opportunity
• Availability of extra finances/huge retentions
• Tax-friendly investment destinations/Favourable investment concessions
• Shareholder interests (The dictates of shareholders)
• Better access to capital markets because of the large size “big is mighty”.
• Risk spreading:- entering new products into new markets offers protection against the failure of current products or markets
• High profit opportunities: -stability in profits because if there are hard times in one industry they offset losses from others.

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