Diversification of the economy in a general sense isa strategy designed to reduce risk by adding assets, products or services, and customers or markets to an already formed portfolio. For the first time the concept is found in the code of the provisions of Judaism, in the Talmud. The formula described is the division of assets into three parts. One part is a business, including the purchase or sale of goods, the second part is liquid assets, for example, gold, the third part is funds concentrated in real estate. The restructuring can be called a competent distribution of valuable resources with such a prospect that the loss of one profitable segment does not affect the overall situation. This definition is ideally suited for the state level as well as for investment, agriculture, any branch of activity.
Narrow interpretation of diversification
Economic diversification is divided into the following areas:
- Banking.It implies a redistribution of loan capital among a significant number of clients. In some states there is a limit on the provision of loans. A financial institution does not have the right to provide a loan in one hand, if its size exceeds 10% of the capital of the bank itself.
- Investment. Provides for the inclusion in the portfolio of additional types of securities or similar, but differing by issuers in industries or companies.
- Production. This is an expansion of the range of products in the development of new production technologies and production.
- Business diversification is defined as the conquest of new markets, the development of new industries.
- Agricultural. Defined as an extension of activity: the active development of livestock and vegetation.
- Conglomerate. This is an extension of the list of services provided and goods within one enterprise. At the same time, the list of products should not have any similarity with the already existing nomenclature.
- Риски.This is the use of a wide range of tools for earnings. At the level of investment is the purchase of not only shares, but also bonds. At the level of business, the development of a new policy, at the level of the economy, is the elimination of dependencies on the world price situation by fully meeting the needs of the population by the state.
A bit of history
The market economy was formed in stages.Each stage of development has its own individual characteristics, especially considering the level of specialization and diversification in the aspect of antagonistic forms of building the production industry. For the first time, the concept of “diversification of the economy” appeared as the dominant economic category in the 50s of the 20th century. During this period, the production efficiency in almost all countries of the world dropped significantly as a result of the relative exhaustion of domestic sources. Began an active battle between states for the world market. The transformation of production has become necessary as a result of bright prerequisites for a slowdown in the development of economic growth and under the influence of scientific and technical progress. Against the background of the fact that the purchase of innovative technology at that time and the introduction of new technologies into the activities of large-scale production, did not produce results, diversification took the place of the most common form of capital concentration. Enterprises and organizations that tried to expand their sphere of influence and increase the number of sources of income at the expense of revenues, achieved not only a high level of competitiveness, but also success.
Strategy and its role at the enterprise level
Concentration solely on one direction.On the part of management, it defines a wide range of advantages for business: organization, management and strategy. The decline in return on capital that was invested in production leads to the need to use a strategy for the redistribution of resources. Diversification of a firm or enterprise, acting as a tool for eliminating imbalances of reproduction and logical distribution of resources, plays the role of an important coordinator of the direction of restructuring the entire economy as a whole, thereby setting a wide variety of tasks and goals for corporations. Redistribution relates to the modification of the most essential elements of the activity. This is a finished product, and the industry, and the market, and the place that the company occupies in a particular area. In an actively developing macroenvironment, the process acts as a kind of basis for achieving a completely new level of market flexibility, both internal and external. The decision on whether to apply a diversification strategy or not is made on the basis of forecasting the future. The true concept of the process is associated with the active development of the company, with the conquest of new areas of its impact. If the company continues to accumulate capital, the redistribution process does not act as the main strategic goal.
Economic diversification
Economic diversification meansrestructuring, which is aimed at modernizing and actively developing a wide variety of industries. The restructuring of Russia is very relevant, in the development of which only three sectors play the most significant role:
- Military.
- Industrial.
- Energetic.
As for tourism, the agricultural segment,production of consumer goods, services, these areas are poorly developed. A critical percentage of consumer-oriented goods is a consequence of an imbalance in the economic sector. This leads to the fact that Russia is strongly exposed to instability in terms of inflation. High inflation leaves a mark on the formation of high interest rates on loans. So, the mortgage and other types of financing of individuals and legal entities are simply inaccessible for fairly wide circles of the population. The structure of the economy, which today is characteristic of the country, serves as nothing more than a brake on development. For the general development of the state, it is extremely important to stimulate the development of completely unrelated industries, in particular the automotive industry and tourism, agriculture and food production.
Benefits of restructuring
Diversification of the economy gives a lotbenefits. The main one is the complete independence of the state of one economic sector from another. If difficulties arise within the framework of one market, the decline of the entire economy of the state will not occur. The disadvantages of the process include the need to take into account the numerous differences between the markets and the specifics of their service, between the subtleties of the production of different types of products. Due to the fact that the Russian government did not expand the range of goods produced, did not master new types and types of production, did not change the types of products, that is, did not modernize production, today the country's economy is in full decline. The reason for the decline can be called the statistical state of investments that were previously sent to the oil and gas industries. Due to the fall in oil prices, with the introduction of sanctions by the EU, the Russian budget is not replenished in the planned amount, and domestic production cannot meet the country's needs. That is why at this stage of development, the diversification of the Russian economy is urgently needed not only for prosperity, but also for the opportunity to survive the crisis. Until the process is activated, the world elite has a chance to influence the country by changing the world price situation, in particular, on fuel.
Who needs to diversify the economy?
Diversification goals are ideal for thoseStates, the development and prosperity of which is closely connected with the export of minerals, with the sale of natural resources. Russia is one of the countries that needs a complete restructuring of the existing economy in accordance with a more efficient model. Countries such as Chile and Malaysia, Indonesia and many others can be a worthy example of successful modernization. It is worth paying attention to the multilevel procedure when studying the question of what is economic diversification. The definition leads to the fact that this task turns out to be daunting for most countries of the world that have been successfully surviving for more than a decade through the extraction and sale of mineral resources. Despite active statements by politicians and analysts, in the overwhelming majority of situations everything remains at the level of conversations.
Work for the future
Основная особенность процесса реструктурирования The economy is that a wide range of activities is carried out today, and the results are achieved with a significant time delay. In other words, diversification, examples of which are quite problematic to find in history, is essentially a job for the future. The result of the activities carried out in the present tense will bear fruit for a long period of time. Active investment in various sectors of the state, including in the services sector, in the tourism industry, in production, gives a good impetus to the active prosperity of private entrepreneurship. Connections between industries are actively beginning to form, prerequisites will be formed for an active increase in trade turnover within the international market. This will all lead to an improvement in the standard of living of the population, to an increase in demand and the formation of supply. The increase in domestic trade in the country in tandem with increasing material flow will raise the general economic indicators of the state.
Subtleties of the Russian economy and the relevance of diversification
Развитие государства с огромными сырьевыми resources, in particular, has its own characteristics. In the dominant number of situations, the rate of energy production is significantly lower than population growth rates. Over time, the level of profitability per capita gradually decreases. It is worth noting that the extractive industries are not able to provide a sufficiently large number of jobs. This all leads not only to the formation of a social threat, but also negatively affects the standard of living. The risk of a crisis arises as a result of the active growth of the unemployment rate. Russia, being a merchant exporter of natural resources, is almost entirely dependent on the international price situation. Despite the use of agreements between countries on an acceptable level of prices for raw materials, there is a risk of a sharp change in pricing policy. The risk was justified in the situation that developed in 2015. The fall in oil prices has led the Russian economy to decline. The concept of diversification implies a competent redistribution of income from the commodity industry among all other areas of government activity, otherwise the occurrence of the “Dutch disease” is possible.
What will save Russia?
Large volumes of production are peculiar to Russia.resources. The main problem is not only that the income from the industry goes into the pockets of the privileged part of the country's population. Complexities in the development of the state are related to the direct relationship between the volumes of resource extraction and the level of corruption. The most elementary option for obtaining large capital is to appropriate income from the energy industry. When the formation of the dominant part of the budget is carried out at the expense of taxes of companies in the extractive industries, the leadership of Russia does not feel much responsibility towards other areas of activity due to their insignificant contribution to the economy. The state of affairs dictates the relevance of the restructuring. Diversification of business, industry, production, all industries will be the country's response to the dictates of the world market. The manifestation of political will and significant efforts can change the situation radically.
Technical points of restructuring
Virtually all types of diversification today will be relevant for Russia. This is due to a number of factors:
- In Russia, there is a sharp decline in the potential for business development.
- Opportunities for activities in a wide variety of industries, although there are, but they do not develop.
- The potential of the extractive industry can be successfully redistributed among other segments.
- The presence of a large number of resources in the mining direction.
К примеру, диверсификация сельской экономики will allow the state not to feel dependence on the supply of products to the domestic market. No restrictions on imports by the EU can hit the economy. Despite active actions aimed at modernizing the economy, including a detailed plan, at the moment the authorities cannot take any actual decisions. Restructuring is impossible without the active development of the domestic market and the availability of consumer solvency. In order for the system to work, initially it is necessary to raise the general standard of living in the country: an increase in wages, the payment of social benefits, the provision of jobs for the population. Modernization must begin precisely within the state, and not outside.
