The stakes of product and service diversification when expanding margins abroad

Diversifying your offer without diluting your margins: this is the equation every company faces as it grows internationally. The North Face case, often cited in business schools, perfectly illustrates the terms of the trade-off.

The trap of diversification by opportunity

A market opens, a distributor asks for a product variant, a range expands: each decision taken in isolation seems rational. Combined, they fragment production, inflate inventory and squeeze unit margin, until revenue growth hides the erosion of profitability.

Three questions before extending a range

• Does this diversification strengthen our core-range position, or pull us away from it?
• Is the operational overhead (production, logistics, marketing) covered by a margin that is actually measured?
• Is the target customer ours, or another business's?

Successful diversification is not an accumulation of products: it is the disciplined extension of an existing competitive advantage, market by market.

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