It seems that diversification is the order of the day. Medical aids are punting movie tickets and travel discounts, supermarkets are offering courier services and wi-fi is sold along with breakfast specials in coffee shops. The line extension trap is worrying, but it is also endemic of the myopic thinking that most companies have fallen prey to. One could argue that companies are so caught up in the business of producing goods and services that they’ve lost focus on the things that actually make people want to do business with them in the first place, frittering away money and time on resources entirely unrelated to the core driver of their success.
Small, start-up companies tend to outsource the elements that fall outside their scope of expertise, whether it is legal guidance, graphic design or technology, to those who do it best. But as they grow, they fall into the trap of assuming that they can replicate business success and cut costs by having expertise in every area. Ultimately, it takes more effort to develop a measure expertise in areas that are secondary to the core of the business than it is to remain focused on your strengths. It drains profitability and becomes a nightmare to manage.
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