Despite the growing importance of identifying new business items for small and medium enterprises (SMEs), most previous studies focus on conglomerates. The paucity of empirical studies has also led to limited real-life applications. Hence, this study proposes a systematic approach to find new business items (NBIs) that help the prospective SMEs develop, evaluate, and select viable business items to survive the competitive environment. The proposed approach comprises two stages: (1) the classification of diversification of SMEs; and (2) the searching and screening of business items. In the first stage, SMEs are allocated to five groups, based on their internal technological competency and external market conditions. In the second stage, based on the types of SMEs identified in the first stage, a set of alternative business items is derived by combining the results of portfolio analysis and benchmarking analysis. After deriving new business items, a market and technology-driven matrix analysis is utilized to screen suitable business items, and the Bruce Merrifield-Ohe (BMO) method is used to categorize and identify prospective items based on market attractiveness and internal capability. To illustrate the applicability of the proposed approach, a case study is presented.
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