What Is Diversification of Business? - Strategies, Definition & Examples

Earn certificates of completion. However, there are a few good examples of successful diversification:. Horizontal diversification strategy is less risky than conglomerate diversification because of the fact that the current customers of the organization are already exposed. December Learn how and when to remove this template message. A short quiz follows. Password Confirm Password confirm is required. Conglomerate diversification Conglomerate diversification involves adding new products or services that are significantly unrelated and with no technological or commercial similarities.

Conglomerate diversification is a growth strategy that involves expanding a company's business into an area, or areas, totally unrelated to its core business. The main advantage of this strategy is the diversification of risk over different industries, thereby making the company less dependent on one sector.

What Are Some Examples of Referrals?

Aviation, energy connections, healthcare, lighting, oil and gas, power, renewable energy, transportation, and more. Walt Disney Company successfully diversified from its core animation business to theme parks, cruise lines, resorts, TV broadcasting, live entertainment, and more.

Thank you for reading this guide. As you continue your progression, these additional resources will be helpful:. The comprehensive course covers all the most important topics in corporate strategy! Product Diversification Expansion into a segment of an industry or into an entirely new industry. What is Product Diversification? Diversification Strategies There are three types of diversification techniques: Concentric diversification Concentric diversification involves adding similar products or services to the existing business.

Conglomerate diversification Conglomerate diversification involves adding new products or services that are significantly unrelated and with no technological or commercial similarities. Diversification mitigates risks in the event of an industry downturn. Diversification allows for more variety and options of products and services.

If done correctly, diversification provides a tremendous boost to brand image and company profitability. Diversification can be used as a defense. By diversifying products or services, a company can protect itself from competing companies. By creating an account, you agree to Study. Explore over 4, video courses. Find a degree that fits your goals. What Is Diversification of Business? In this lesson, you'll learn about business diversification, different diversification strategies, and be provided some examples.

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Intro to Public Relations. Companies sometimes diversify their business activities to manage risk or expand into new markets. Strategies for Diversification There are different diversification strategies a company may employ. Try it risk-free No obligation, cancel anytime. Want to learn more?

Select a subject to preview related courses: Lesson Summary A business diversifies by expanding into a new product or market. Learning Outcomes When you have finished this lesson on business diversification, you could be prepared to: Express knowledge of diversification, including its purpose Understand why a business might choose to diversify Discuss the four ways in which businesses can diversify.

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Help and Review International Business Law: Help and Review Torts in Business Law: Latest Courses Computer Science Network Forensics Computer Science Popular Courses Western Civilization I: Help and Review World History: Defensive reasons may be spreading the risk of market contraction, or being forced to diversify when current product or current market orientation seems to provide no further opportunities for growth.

Offensive reasons may be conquering new positions, taking opportunities that promise greater profitability than expansion opportunities, or using retained cash that exceeds total expansion needs. The second dimension involves the expected outcomes of diversification: Management may expect great economic value growth, profitability or first and foremost great coherence with their current activities exploitation of know-how, more efficient use of available resources and capacities.

In addition, companies may also explore diversification just to get a valuable comparison between this strategy and expansion. Of the four strategies presented in the Ansoff matrix, Diversification has the highest level of risk 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 detract 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: Because of the high risks explained above, many companies attempting to diversify have led to failure. However, there are a few good examples of successful diversification:. From Wikipedia, the free encyclopedia. This article includes a list of references , but its sources remain unclear because it has insufficient inline citations.

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What is Product Diversification?

Horizontal Diversification Strategy: Horizontal diversification occurs when new & unrelated products are provided to the existing customers. Horizontal diversification strategy is less risky than conglomerate diversification because of the fact that the current customers of the organization are already exposed. For example, if a computer company decides to produce notebooks, the company is pursuing a conglomerate diversification strategy. Of the three types of diversification techniques, conglomerate diversification is the riskiest strategy. Examples of Conglomerate Diversification • Example of Indian company which have adopted apart of growth and expansion through conglomerate diversification the classic examples is of ITC, a cigarette company diversifying into the hotel industry.