Impact of “Product Scope” and “Customer Scope”

Suppliers' Diversification Strategy and Performance

Abstract

The two most important approaches toward the diversification strategy for suppliers are extending “product scope” (product range) and “customers scope” (customer reach) within the same industry. This study analyzes the diversification strategies of Japanese automobile component suppliers by focusing on business in each component with each customer and dividing it broadly into existing business and new business. Subsequently, this study further classifies new business along the dimensions of both product scope and customer scope into existing and new, resulting in a total of five categories, which were then analyzed to explore the relationship with the duration of the business. Findings revealed that relationships endure the longest and have the highest probability of continuing for the new customer/existing product category, that is, providing existing products to new customers.