advantage and disadvantage of the diversification

The Disadvantage:
Diversification is the riskiest of the four strategies presented in the Ansoff matrix and requires the most careful investigation. Going into an unknown market with an unfamiliar product offering means a lack of experience in the new skills and techniques required. Therefore, the company puts itself in a great uncertainty. Moreover, diversification might necessitate significant expanding of human and financial resources, which may detracts focus, commitment and sustained investments in the core industries. Therefore a firm should choose this option only when the current product or current market orientation does not offer further opportunities for growth. In order to measure the chances of success, different tests can be done:

The attractiveness test: the industry that has been chosen has to be either attractive or capable of being made attractive.
The cost-of-entry test: the cost of entry must not capitalize all future profits.
The better-off test: the new unit must either gain competitive advantage from its link with the corporation or vice versa.
The Advantage:
Because of the high risks explained above, many attempts of companies to diversify led to failure. However, there are a few good examples of successful diversification:

Virgin moved from music producing to travels and mobile phones
Walt Disney moved from producing animated movies to theme parks and vacation properties
Canon diversified from a camera-making company into producing whole new range of office equipment

Check out :

http://thinknolimit.blogspot.com/2007/01/blog-post.html

There are more examples in branding point of view.