Tourism Training Module 4 Diversification

1 TOURISM TRAINING

Welcome

Welcome to the Avondhu Blackwater Tourism Training Course. Over the few weeks, we will teach you about some of the theory about marketing, branding and selling online.

We will then put what we have learned into practice and help you to create a Tourism Product for your business.

Online Training will not be recorded. All slides with be made available to you on module completion.

2 TOURISM TRAINING

Schedule

The Ansoff Matrix

Diversification Strategy Definition

Diversification Strategies

RECAP – Buyer Personas

Q and A

3 TOURISM TRAINING

Ansoff Matrix

The Ansoff Matrix, also called the Product/Market Expansion Grid, is a tool used by firms to analyse and plan their strategies for growth. The matrix shows four strategies that can be used to help a firm grow and analyses the risk associated with each strategy.

4 TOURISM TRAINING

Diversification – Business Definition

A diversification strategy is the strategy that an organization adopts for the development of its business. This strategy involves widening the scope of the organisation across different products and market sectors. The strategy is to enter into a new market or industry which the organisation is not currently in, whilst also creating a new product for the new market.

Diversification strategy is a form of growth strategy which helps the organisational business to grow. It opens up new possibilities for the organisation. By adopting this strategy, the organisation not only diversifies its products offerings in the target markets but also expands its business horizons. The strategy helps the organisation to increase sales volume and revenues while keeping costs to minimum.

5 TOURISM TRAINING

Why do companies diversify?

First and foremost, companies diversify to achieve greater profitability. Diversification is used by businesses to help them expand into markets and industries that they haven’t currently explored. This is achieved by adding new products, services, or features that will appeal to the customers in these new markets.

By expanding their reach and appeal, businesses are able to explore new avenues for sales, and in turn, have the potential to vastly increase their profits.

In addition to achieving higher profitability, companies choose to diversify for a variety of other reasons. For instance, diversification can also allow a company to minimise the risk of an industry downturn, it can boost brand image, and it can also be used as a defence mechanism to protect a company from strong competition.

On the other hand, diversification strategy is not without its downsides. Out of the four growth strategies proposed by Ansoff, diversification is not only the riskiest but also the most complex.

6 TOURISM TRAINING

Horizontal Diversification

If your company decides to add products or services that are unrelated to what you offer currently, but may meet some more needs of your existing customers, this is known as horizontal diversification.

Horizontal diversification is typically the diversification strategy with the least amount of risk involved, as you’re working mostly within familiar customer and market segments. Say you’re the CEO of the Dunder Mifflin Paper Company — it might make complete sense to move into the production of printers. This is a different product altogether, but it has the potential to attract many of your existing customers.

7 TOURISM TRAINING

Concentric Diversification

Concentric diversification occurs when a company enters a new market with a new product that is technologically similar to their current products and therefore is able to gain some advantage by leveraging things like industry experience, technical know-how, and sometimes even manufacturing processes already in place. Concentric diversification can be beneficial if sales are declining for one product, as loss in revenue can be offset by a rise in sales from other products.

An example of concentric diversification would be a computer manufacturer who diversified from clunky desktop PCs into laptop production. This would allow them to immediately take advantage of the new wave of computer users who demanded more portable solutions.

8 TOURISM TRAINING

Conglomerate Diversification

If you’re looking to diversify into completely new markets with unrelated products to reach brand new customer bases, this is known as conglomerate diversification. The term conglomerate refers to a single corporate group operating multiple business entities within entirely different industries. The parent company that owns all of the individual entities is known as a conglomerate, and it became one by successfully implementing a conglomerate diversification strategy.

An example of conglomerate diversification would be Tata Group, which was founded in 1868 and diversified from its humble beginnings as a hotel company into a global multinational encompassing 100 individual companies. It now employs 706,000 people across a variety of sectors such as chemicals, steel, automotive, engineering, telecommunications, information systems, and consumables.

9 TOURISM TRAINING

Vertical Diversification

Vertical diversification is also known as vertical integration and occurs when a company moves up or down the supply chain by combining two or more stages of production normally operated by separate companies. This typically means the company decides to start taking over some or all of the functions related to the production and distribution of their core product, such as the purchase of raw material, manufacturing processes, assembly, distribution and sale.

For example, If you’re a retailer, vertical diversification might mean moving into manufacturing the products you currently sell. While this can help lower costs by covering all the needs of your business “in house”, the downside is that it can reduce the flexibility of your business and reduce the opportunity for horizontal diversification in the future.

10 TOURISM TRAINING

There are two forms of vertical diversification, which are identified by the direction you move in the supply chain.

1. Forward diversification

If you’re at the beginning of a supply chain in terms of your business positioning, you might decide you want to control operations further along the chain as well. An example of this could be a mining company that decides it wants to expand into the processing and development of its raw product.

2. Backward diversification

If you’re closer to the end of a supply chain, you can think about how to diversify into the markets that funnel into your product. For example, Netflix began as a media distribution platform, but now manufactures its own content.

11 TOURISM TRAINING

Apple | From Computers to MP3 Players and Phones

For decades, Apple was a brand strongly rooted in the computer and software segments of the tech industry. From 1976 onwards, they created iconic computers such as the series, but by the late 1990s, the company was struggling in this market, falling way behind its main rival Microsoft and their hardware partners.

Under the guidance of , however, the company’s fortunes changed drastically, with the ground-breaking launch of the iMac and iBook series in 1997. With the rise of digital downloads, the iPod was also a success upon its release in 2001, but their biggest success in product diversification was undoubtedly the launch of the first iPhone in 2007.

Thanks to this continued diversification (other prominent products include the iPad, the , and Apple TV) the company has been able to create an entire ecosystem of interlinked tech products – a core driver of its entire business model. It is now one of the biggest and most valuable brands in the world and, although all their products are developed in-house and have a distinctive style, Apple has acquired dozens of smaller firms (such as PA Semi and (for smartphone SOC chips), Polar Rose, FingerWorks, and IMSense (for the iOS software ecosystem), and Poly9 and Coherent Navigation (for ) to improve their products.

12 TOURISM TRAINING

RECAP – Customer/Buyer Personas

Demographics

This is the most basic level of data that should be included in the buyer persona profile.

Age/Gender (try to be as precise as possible here as this may guide copywriting and design teams towards using the right language and style)

• Level of income (including annual income)

• Location (urban/suburbs or actual city/country)

• Family status (especially important for B2C consumer brands)

• Level of education (particularly important for content marketing teams)

• Professional status

Both B2B and B2C companies should pay attention to this part as they often have to determine whether they target decision-makers or actual product or service users.

• Job title and level (manager, professional, specialist, etc.)

• Industry

13 TOURISM TRAINING

RECAP – Customer/Buyer Personas

Psychographics

Psychographics relate to the persona’s values, standpoints, and goals. This is an important part of the profile as people are increasingly insisting that companies share their values, express their opinion, and join global conversations.

Edelman research shows that 65% of consumers claim that a brand’s reaction to the COVID-19 pandemic will have an impact on whether they choose to stay with the service/product; 33% admitted to already withdrawing from a brand that failed to meet their expectations.

Professional/personal goals

Beliefs and values (for instance, for US businesses, it may be important to know whether their buyer persona is a Democrat or a Republican, religious or not, conservative or liberal, etc.)

Pain points and challenges

This section is the one marketers and other teams should pay the most attention. Only by learning about customer problems and obstacles can a company develop and offer the most relevant solution.

14 TOURISM TRAINING

RECAP – Customer/Buyer Personas

Biggest struggles and pain points

• Obstacles to overcoming the challenges they are facing

• Irrational/rational fears

• Influences and information sources

To identify the buyer's journey of the ideal customer, discover who they listen to, who they trust, and on which platforms they look for solutions. This information is a valuable source to guide influencer marketing, communication, PR, and ad and content placement efforts.

Purchasing process

The last section has to reveal how the target persona makes buying decisions. These insights will amplify the buyer’s journey and sales, as well as helping digital teams to define trigger events.

• The persona’s role in the purchase decision-making process

• Potential lifetime cycle (how frequently do they buy the product or service?)

• What stops them from making a purchase?

15 Q and A

16 17