Importance of Diversification for a Company

Diversification is important to a company for it allows a company to spread its business risk across different industries. The general reason for diversification is to add shareholder value which would otherwise not be achieved by the shareholders on their own without spreading their investments When a company diversifies to unrelated businesses, its risks are spread across different ventures which makes it much safer (Gamble & Thompson, 2017). Diversification helps in increasing profit margins allowing businesses to expand their market base and venture into new avenues that are outside their core sectors (Gamble & Thompson 2017). It also gives a company a competitive defense in that a customer can get all services and products from one company to avoid customer underserving. Apple Inc. offers different products and services to its customers which allows it to retain its customer base. Diversification also stabilizes influence by reducing the volatility of resources and revenue when demand falls or rises. 

Apple Inc. has a good chance of diversifying because it has a history of healthy profit margins which makes it more attractive in the industry. Apple CEO Tim Cook said that the business has been buying a new company every two weeks and within 6 months of 2019, it had bought about 20-25 companies. The buyouts of smaller companies which benefits the company by increasing talent and intellectual property in its workforce. The company has promising opportunities and its threats are reduced due to its unique features. The company can produce many products which it can build on its Apple devices, iPhones, Macs, iPods, and iPads. The company has been able to diversify from just producing phones and computers to software development. The company has an advantage because its phones and computers are compatible with the software they develop such as Apple’s App Store, Apple Pay, iCloud, and Apple Music. The company has opportunities to venture into mobile payment. 

Reference 

Gamble, J., & Thompson, A. A. (2017). Essentials of strategic management: The quest for competitive advantage.