Specialising in diversification

Ask Uzair Hassan what his company, 3H Solutions Group, specialises in and you should be prepared to wait a while. It supplies goods such as heavy machinery and electrical generators throughout the Middle East.
It also provides corporate training and consultancy programmes to help human resource departments or businesses that want to "live" their brand. And another arm even offers interior design work, with clients including a regional restaurant, bank and homeowners.
"It's working for us," says Mr Hassan, the chief executive of the Dubai-based company. "Through the economic downturn, when demand for training was low, the import-export side of the business was up, and if that was low, interior design was up."
The various units of Mr Hassan's company are different, but they all have a common thread: much like a well-balanced investment portfolio, each piece of the business helps protect another in the event of a sudden fall.
Given these uncertain times, some business owners are arguing that providing new kinds of products or services to existing customers, as well as expanding into different markets, can help safeguard a firm from a dip in a particular region.
But not everyone agrees. Diversifying a business "ultimately limits your ability to scale", warns Philip Anderson, the professor of entrepreneurship at Insead in Abu Dhabi.
"The problem is that at some point you can't scale, because you're doing too many things and you can't ever do any of them well enough to enjoy the cost economies and synergies," he says.
Diversifying too quickly can also dilute the main products or services of a company, not to mention make it confusing for clients. There are also plenty of other risks.
Costs, for one, will almost certainly rise to cover new product prototypes and marketing campaigns, and there are always unforeseen challenges when a company expands into a new market.
That is why some business owners have tried diversifying within a specialised area.
Al Dobowi Group, a company based in Dubai with 1,500 employees globally, started out more than three decades ago focused exclusively on selling tyres.
As the company grew, it looked to broaden its product base by offering batteries, motor lubricants and other products.
"We were doing product diversification but also diversifying geographically," says Harjeev Kandhari, the company's executive director.
He says the company now has a presence in countries within the Middle East and Africa as well as Europe and North America.
The combined effort has helped Al Dobowi Group ride out recessionary waves in various parts of the world, says Mr Kandhari. "It's our strategic shift," he says.
"We want to keep growing our tyre business but also other parts of our business."
nparmar@thenational.ae