Small and Medium Enterprises (SMEs) are the backbone of the Sri Lankan economy, contributing significantly to employment and GDP. However, the country has faced several setbacks and businesses are struggling to survive, especially startups and SMEs. Diversification can be a powerful strategy to mitigate these risks and ensure long-term sustainability.
When to Diversify
Diversification should be considered when:
- Your current market is saturated: If, your existing product or service is facing intense competition, leading to declining profits and market share.
- Your core business is cyclical: If your revenue stream is heavily dependent on seasonal fluctuations or economic cycles.
- New opportunities arise: If you identify new market segments or technologies that could significantly benefit your business.
- Your competitors are diversifying: To maintain a competitive edge and avoid being left behind.
How to Diversify
- Conduct thorough market research: Identify new market segments, customer needs, and potential competitors.
- Analyze your core competencies: Determine what your business does best and how those strengths can be leveraged in new areas.
- Choose a diversification strategy:
- Related diversification: Expanding into businesses that are related to your existing core business. For example, a clothing retailer might expand into accessories or footwear.
- Unrelated diversification: Entering into completely new and unrelated businesses. For example, a technology company might invest in real estate.
- Develop a comprehensive business plan: Outline your goals, strategies, financial projections, and risk mitigation plans.
- Secure adequate funding: Explore various funding options, including bank loans, investors, and government grants.
- Build a strong team: Recruit talented individuals with the skills and experience needed to succeed in the new venture.
- Monitor and adapt: Continuously monitor your progress, gather feedback, and make necessary adjustments to your strategy.
Diversification is not without risks, but it can be a valuable tool for Sri Lankan SMEs to achieve sustainable growth and long-term success.By carefully considering your options and implementing a well-thought-out strategy, you can overcome any decline your business may be facing at present, open doors to a brand new trade and secure durable growth.
>>>Success strategies for SMEs to overcome the economic crisis and maintain consistency