By  Laura çela

After increase of capital, Albanian entrepreneurs are in hurry to increase range of businesses. Over ½ of businesses are included in process of diversification. But major part continues to trust in intuition and not in market research. Advantages, but also risks that may come from unstudied entry to other markets  

Administrator of meat processing, EHW, Mr. Luan Leka has started administration of a new company for production of “Qafështama” water some months ago. Even though it is the leader in sector of meat processing, this seems not to help to have a great success also in the other business. As he admits “entry in market of natural water was a little hurried and not studied so well, because it has a lot of difficulties and low profits. Although sales in this market are increasing it is very difficult to go ahead”. Mr. Leka that is helping his new business by using geography and good name of old company is not very certain for necessity of diversification.

In fact, according to experts, he has entered a market where competition is now consolidated and other companies have been working for years for creation of a trustable brand. Meanwhile, Qafe Shtama should be working on creating a name and consumer trust and it has not had a market entry strategy at prices lower than its competitors, what should give to it a kind of advantage in market.

In fact, there are many cases of failure in diversification of businesses all over the world, such as failure entry of Quarker Oats Company to business of fruit juices through a company called Snapple, failure of British company of production of cement, Blue Circle, which made diversification with lawn mowers without having a strong base.

 
Businesses: it is good to change

Mr. Rezart Taçi, from fuel trade to education business

After gaining the guarantee of being the leader in one of biggest markets, the fuel market, famous businessman, Mr. Rezart Taçi has decided to explore new markets. Even though in administration he has decided to believe to old rules by doing everything himself, in distribution of investments he seems to get out of schemes. Now “Taçi oil” Company has completed construction of a new private grade and high school, called “Nobel”.

According to him, creation of such a business came after consultations with experts of this sector, who encouraged Mr. Taçi to use his capital in this sector of economy. He thinks that to invest in various businesses is a wise and necessary solution that every consolidated business should do. “To diversify into various sectors certainly has its advantages. In such a situation when competition of markets is considerably increased, being permanent in market is becoming increasingly more difficult. By owning some businesses, you have the possibility to protect yourself, because when you are in difficulties with one business you can be protected by your other businesses”, – says Mr. Taçi. According to him, diversification of his business has just started because very soon “Taçi Oil” Company will be included in other businesses.    

Bushati, from construction to banks

Company of three brothers “Bushati sh.p.k.” is not behind in diversification. This company is involved in some sectors such as construction, reconstruction and banking system. According to administrator Mr. Ilirjan Bushati, diversifying is very positive, because it lowers the risk of bankruptcy. “We exploited diversity of professions of owners of company with diversity of investments very well and we are very satisfied so far”, – says Mr. Bushati.   

 
AM Group, from production of food to trade center

Lately, businessmen are hesitating less and less to invest in various directions. An example of this thesis is a giant investment that AM Group, a company involved in agro food industry, is realizing in construction of a trade center. After a study related to trade centers in our country and their number, administrators decided to construct a new rival in this field, by exploiting the suitable geographic position of company.

 
Decision, mostly without any research

As world wide experts explains, often companies become nervous for the fact that they should spend all their time and energy only in one thing. Their thoughts are directed to theory of portfolio of investments, in which exposure to risk is reduced by owning a wide range of market stocks. So they decided to do the same thing, reduce the risk of being present in few businesses by being involved in many of them. They achieve such a thing either by buying businesses or by establishing new businesses. The most usual way is the first one. Companies that follow the strategy of diversification have a name. They are called conglomerates. 

But if worldwide majority of companies are thinking well and making a detailed research of new market they target to enter, this is little applied in Albania. Although amounts they invest are some million EUR, Albanian businessmen accept in a survey of “Monitor” that they have not performed market study before getting involved in a new business. Mr. Rezart Taçi says that for construction of a new school he has not performed any research, but he is consulted with an expert of this field, who has also undertaken the administration of this school. The same thing can also be said for EHW, for its investment in construction of “Qafshtama” water plant, or also for Bushati brothers who have trusted more in their intuition. Even though foundation of a bank asks for almost “colossal” investments, Mr. Ilirjan Bushati says that for Credins Bank is not done any research by investors, but it is evaluated that this business is successful all over the world. Businessmen are not disappointed so far, this is because “poverty” of Albanian economy related to competition, but everything will be more difficult during consecutive years. As experts advise Albanian entrepreneurs should not follow only the “stream” or listen to thoughts of specialists. Upcoming years will make Albanian entrepreneurs to better study the market before becoming its part, otherwise they may go bankrupt.  

Diversification, pro and against

Advantages

– Risk reduction. Concentration of assets on only one sector means having total risk of sector where business is founded; 

-Diversification can increase opportunity to share employees or to exploit synergies. Companies can save by selling a wide range of products by using the same infrastructure;  

– Possibilities for financial diversification. A business that has free financial capitals can invest by depositing its free capitals with interest

 Risks

– Lack of specialization in market where it is entering: trying to do something for which you know a little; 

– Unstudied entry: Diversification asks for good managerial and leading skills. Finding of appropriate sector and a good study of activity are problems and engagements that should be resolved by professionalism

– Diversification requires that some relations among various activities or sectors that comprise the whole have to be taken into consideration. So not every kind of segmentation is diversification

– Risk of losing control from hurried and unstudied expansion. 

Diversification cases

EHW

–Administrator of meat processing, EHW, Mr. Luan Leka has started administration of a new company for production of “Qafështama” water some months ago

 
Mr. Rezart Taçi

Mr. Rezart Taçi, from fuel trade to education business

Company of fuel trade “Taçi Oil” has completed the construction of new private grade and high school, “Nobel”.

 “Bushati sh.p.k”

Company of three brothers “Bushati sh.p.k.” is involved in various sectors such as construction, reconstruction and banking system

AM Group

A giant investment that AM Group, a company involved in agro food industry, is realizing in construction of a trade center.