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,
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
Diversification, pro and against
– 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
– 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.
–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”.
Company of three brothers “Bushati sh.p.k.” is involved in various sectors such as construction, reconstruction and banking system
A giant investment that AM Group, a company involved in agro food industry, is realizing in construction of a trade center.