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7 strategies of product diversification

Product diversification for importers: 7 strategies for expanding your offerings

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In this global competition era, staying competitive requires more than just offering a single type of product. Product diversification is the key to unlocking new markets, mitigating risks, and scaling your import business to greater heights. In this article, we’ll delve into the fundamentals of product diversification and explore seven strategies that importers can implement to expand their offerings effectively.

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What is product diversification?

Product diversification refers to the strategic expansion of a company’s product offerings to encompass a wider range of products or services. This approach aims to minimize risk by reducing dependency on a single product and tapping into new markets to drive growth. Importers can diversify their product portfolio by introducing new products, exploring new markets, or targeting different customer segments.

Why businesses must do diversification for scaling their import business?

Diversification is imperative for import businesses looking to scale and thrive in today’s competitive environment. It is a strategic move to broaden a company’s range of sourced products, thus reducing reliance on a single market.

By offering a diverse range of products, businesses can cater to varying customer needs and preferences, thereby expanding their customer base and revenue streams. Additionally, product diversification helps mitigate risks associated with market fluctuations and changes in consumer behavior, ensuring long-term sustainability and profitability.

There are many reasons that compels businesses to go for diversification.

  • To mitigate uncertain and uncontrollable risks.
  • You get more options for products and services which can boost sale in your target market with new products.
  • Diversification can be used as a defense. By diversifying products or services, a company can protect itself from competing companies.
  • In the case of a cash cow in a slow-growing market, diversification allows the company to make use of surplus cash flows.

4 Methods of product diversification:

Product diversification infographic Horizontal diversification vertical diversification

1. Horizontal diversification:

Horizontal diversification happens when a company introduces new and unrelated products or services to its existing consumer base. For instance, if an importer of lamps start selling candle holders, here both are within the same industry, home decor, but the product is new.

2. Vertical diversification:

Vertical diversification involves expanding a company’s operations either upstream or downstream along its supply chain. Upstream integration involves moving closer to the source of raw materials or production, while downstream integration involves moving closer to the end consumer. This strategy aims to improve efficiency, control costs, and enhance competitiveness by gaining more control over the production process or distribution channels. For example, a furniture manufacturer may vertically diversify by acquiring a timber plantation (upstream integration) or opening its own retail stores (downstream integration).

3. Concentric Diversification:

Concentric diversification involves expanding into related products or markets that complement the company’s existing business. Here’s an example: Coca-Cola is an example of a company that used concentric diversification to grow. It began by making syrup for soda and later started making soft drinks too.

4. Conglomerate diversification:

Conglomerate diversification involves adding new products or services that are significantly unrelated and with no technological or commercial similarities.For example, if a computer company decides to produce notebooks.

7 best strategies to diversify your product portfolio:

1. Market Research and Analysis

a) Identify Customer Preferences

Understanding the needs and preferences of your target customers is crucial for successful product diversification. Conduct surveys, gather feedback, and analyze purchase patterns to identify gaps in the market and opportunities for new product offerings. By catering to customer preferences, importers can ensure that their diversified product portfolio resonates with their target audience, driving sales and profitability.

b) Forecast Demand and Market Positioning

Forecasting demand and positioning new products in the market are essential steps in the product diversification process. Importers must assess market demand for potential new products, taking into account factors such as season, industry trends, and competitor activity. By accurately forecasting demand and strategically positioning their products, importers can optimize sales and maximize return on investment.

2. Consider your long-term goals

a) Ensure Consistency with Goals

Importers should ensure that their product diversification efforts are in line with their long-term business goals and objectives. Whether the goal is to expand into new markets, increase market share, or enhance brand reputation, every product introduced should contribute to the key business strategy. By maintaining consistency with their goals, importers can avoid diluting their brand identity and focus their resources on initiatives that drive meaningful results.

b) Consider products USP (Unique Selling Point) in decisions

When evaluating potential new products to add to their portfolio, importers should consider the unique selling points (USPs) of each product. This involves identifying what sets the product apart from competitors and how it addresses unmet customer needs. By focusing on products with strong USPs, importers can differentiate themselves in the market and attract customers seeking unique and innovative solutions.

3. Customer Segmentation and Targeting

a) Precision in Customer Segmentation

Importers should segment their customer base into distinct groups based on relevant criteria such as age, gender, income level, geographic location etc. By segmenting customers, importers can better understand their diverse needs and preferences, allowing them to tailor their product offerings and marketing messages accordingly. This precision in customer segmentation enables importers to deliver personalized experiences that resonate with their target audience, driving customer satisfaction and loyalty.

b) Enhancing Brand Loyalty

By diversifying their product portfolio to cater to different customer segments, importers can strengthen brand loyalty and increase customer lifetime value. By offering a diverse range of products that meet the varying needs and preferences of their customers, importers can establish themselves as trusted partners and preferred providers in their respective markets. This enhanced brand loyalty not only drives repeat purchases but also encourages word-of-mouth referrals and positive reviews, further fueling business growth and success.

4. Expand Product Line

a) Diversification Strategy:

Importers should develop a clear diversification strategy that outlines the types of products they plan to introduce and how they align with their overall business objectives. This strategy should consider factors such as market demand, competitive landscape, and resource availability, ensuring that new products are positioned for success. By diversifying product line strategically, importers can minimize risk and maximize return on investment, driving sustainable growth and long-term success.

5. Find new resources

a) Identify Quality Manufacturers and Suppliers

Importers should conduct thorough due diligence when selecting manufacturers and suppliers for their diversified product portfolio. This involves assessing factors such as production capabilities, product quality, reliability, and ethical standards to ensure that suppliers meet the importer’s requirements and expectations. By partnering with reputable manufacturers and suppliers, importers can minimize quality issues, supply chain disruptions, and other risks associated with product diversification, ensuring a seamless and reliable supply of products to meet customer demand.

b) Seek help of local sourcing agents:

Local sourcing agents can provide invaluable support to importers looking to diversify their product portfolio. These agents have in-depth knowledge of local markets, supplier networks, and industry trends, allowing them to identify new sourcing opportunities and negotiate favorable terms on behalf of importers. By leveraging the expertise of local sourcing agents, importers can overcome language barriers, cultural differences, and logistical challenges, ensuring a smooth and efficient sourcing process that meets their specific needs and objectives.

6. Take Advantage of the Latest Technology

a) Leverage E-commerce Platforms

Importers should leverage e-commerce platforms such as Shopify, Amazon, Alibaba, to expand their reach and grow their customer base. These platforms provide access to a global audience of potential customers and offer powerful tools for marketing, sales, and customer engagement. By establishing an online presence on e-commerce platforms, importers can showcase their diversified product portfolio, attract new customers, and drive sales growth, while also gaining valuable insights into customer behavior and preferences.

b) Automate daily tasks:

Automation tools such as inventory management software, order processing systems, and customer relationship management (CRM) platforms can streamline operational processes and improve efficiency for importers. By automating routine tasks importers can free up time and resources to focus on strategic initiatives such as product development, marketing, and business expansion. This not only increases productivity and reduces costs but also enhances the overall customer experience, driving satisfaction and loyalty.

7. Test and Iterate (Risks in Product Diversification)

1. The Attractiveness Test-

  The Attractiveness Test addresses if the new market is appealing for the company to enter in the first place.The industries or markets chosen for diversification must be attractive. Porter’s attractiveness tests can help to determine the attractiveness of an industry.

2. The Cost-of-Entry Test-   The cost of entry must not capitalize on all future profits.

3. The Better-off Test –   There must be synergy; the new unit must gain a competitive advantage from the corporation or vice-versa.

4 Key benefits of product diversification in import business:

1. Rule the untouched market segment

When there is no competition, you can establish a monopoly by strategically entering the market with valuable supplies that meet unmet demands. This strategic entry not only positions your business as a pioneer but also allows for the establishment of a strong foothold in the market. Monopolizing a market segment allows for increased margins compared to other segments, enabling businesses to optimize profitability. Furthermore, operating in an unchallenged market segment requires less but consistent efforts, as there is reduced pressure to allocate resources towards aggressive marketing campaigns.

2. Risk mitigation

Diversifying product lines is an effective strategy for mitigating the risk associated with economic fluctuations affecting a single product line. By establishing multiple revenue streams across different product categories, the impact of downturns in one segment is minimized. This diversification ensures a more stable income stream, safeguarding against unforeseen challenges and market uncertainties.  Moreover, diversification allows businesses to adapt to changing market conditions and consumer preferences, enhancing resilience in the face of adversity.

3. Rebranding your business

Offering products beyond your existing lineup presents an opportunity to reshape your brand’s image and appeal to a wider audience. A diverse product range not only increases brand visibility but also enhances brand recall among consumers. By catering to diverse consumer preferences, businesses can strengthen their brand identity and foster long-term customer loyalty. Additionally, rebranding through product diversification enables businesses to position them as innovative and forward-thinking, distinguishing themselves from competitors in the market.

4. Utilize your capabilities more

Expanding product lines does not necessarily require the establishment of entirely new systems or infrastructure. Existing resources such as employees, logistics, and equipment can be leveraged for operations. If a product fails due to uncertain circumstances, the heavy investment behind resources will be saved as we leveraged the existing resources rather than investing on new resources. This strategic utilization of existing capabilities allows businesses to optimize efficiency and minimize operational costs. Furthermore, revenue generated from new products can be earned without significant additional investment. This results in maximizing profitability and high return on investment.

3 Major obstacles in product diversification:

1. Lack of new industry knowledge

Venturing into new product lines requires specialized skills, knowledge, and experience for success. Businesses may encounter challenges in adapting to the unique dynamics of unfamiliar industries. Overcoming this obstacle needs investment in acquiring new industry knowledge or partnering with experts in the field.

  • Solution

By leveraging the expertise of industry professionals, businesses can develop effective strategies for market entry and expansion.

2. Finding right market for new products

As an importer, navigating cultural differences and time zones when dealing with suppliers from different countries can pose significant challenges. Overcoming such obstacles requires careful planning and consideration of logistical solutions to ensure smooth operations.

  • Solution

Businesses must conduct thorough market research to identify suitable markets for new products and develop strategies for market penetration.

3. Setting up new resources

Establishing new resources, including machinery, teams, and departments, can be time-consuming and resource-intensive. Proper planning and investment are necessary to channelize new departments effectively and ensure successful integration into existing operations.

  • Solution

Businesses must allocate sufficient resources and manpower to facilitate the setup of new resources, minimizing disruptions to ongoing operations and maximizing productivity.

Case study:


Coca-Cola introduced Coca-Cola Zero Sugar to provide to customers preferring beverages with no sugar ingredients, effectively diversifying its product lineup to capture a new segment of consumers.

Walt Disney:

Started from getting success in animated cartoons to spreading their business in theme parks such as Disneyland, television channels, consumer products from toys to videogames, they diversified their income streams to very unsimiliar markets.


It is not only search engine but they diversified their services in advertising (google ads), home automation products, Android operating system etc.


Product diversification is essential for importers looking to scale their businesses and stay competitive in today’s dynamic marketplace. By employing the strategies outlined in this article, importers can effectively expand their product offerings, tap into new markets, and drive sustainable growth and profitability. By understanding customer preferences, aligning with long-term goals, targeting specific customer segments, expanding product lines, finding new resources, and leveraging the latest technology, importers can unlock new opportunities and achieve success in the import business landscape.

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