Diversification is one of the growth strategies stated in the Ansoff Matrix and it involves expansion into new markets through the development of new products. It has often been referred to as the “suicide cell” due to its low success rate. Though it may result in high returns, diversification involves high risks and many companies have failed at it.
MMI, being an insurance company, purchased Guardrisk which focused on retail and telecom regarding insurance. It was a good move as it provided them with new channels to sell their existing products. Many company mergers are accompanied with friction due to the combining of two companies with different cultures. However, MMI’s decision to leave Guardrisk as a separate unit has allowed it to expand into the insurance retail market without the negative consequences that usually follow a merge. MMI’s example shows how diversification can be more successful if the good or service that is added is related to the current good that the company deals with. In this case, the making of insurance and its selling.