Diversifying your way out of crisis: strategic diversification for textile service SMEs as a response to the COVID-19 pandemic

Abstract

The global COVID-19 pandemic has brought about difficult challenges for the business of most companies. Especially affected are those that still require the presence of workers in an operations facility, as is the case with the textile service industry. The industry is even more affected by the loss of a significant number of clients, since it mostly provides products and services to healthcare, hospitality and other industrial sectors, all of which have been shaken by the pandemic. Because of such difficult market conditions, the survival of textile service companies has been brought into question and this paper aims to identify a strategy that can help such companies survive in times of crisis and build a more stable foundation for the unpredictable future market developments. The objective of this paper is to overcome this issue by finding a way to increase the revenue from existing clients and attract new clients, while keeping additional costs and investments to a minimum, which can be achieved through the implementation of a diversification strategy. Through a case study of a Croatian textile service small to medium enterprise (SME), in-depth analysis of the company and the Croatian textile service market, as well as the review of literature on diversification, this paper determines the problematic areas, identifies the solutions to each through horizontal diversification, and finally proposes a diversification strategy designed to allow such companies to overcome the crisis and stabilize their business for the post-pandemic future. The main hypothesis of the paper is that a carefully planned and executed horizontal diversification strategy, based on the diversification of products/services, clients and sectors, can rectify the business trouble caused by the COVID-19 pandemic for a typical textile service SMEs. Even though diversification strategies in business are widely discussed and often a subject of dispute, in the situation of a pandemic, they represent a powerful tool for recovering from the crisis caused by the novel virus, but only if carefully planned and executed, in order to create a perfect fit with the existing company culture, brand and budget. Key words: textile service, textile rental, diversification, horizontal diversification, pandemic, COVID-19.