Diversification strategies Flashcards
Diversification strategies
Used to expand business operations by adding products or services of existing business into new markets
Types of diversification strategies
-Concentric diversification
-Horizontal diversification
-Conglomerate diversification
Concentric diversification
-The business adds new products or services that are related to existing products or services but will appeal to new customers
-Occurs when a business wants to increase its product range and markets
-The business creates a new product that is technologically similar to existing products that are aimed at new customers
-Occurs when the business uses expertise to create products with some degree of similarity but with clear differentiation from current products
Horizontal diversification
The business adds new products or services that are unrelated to existing products but may appeal to existing customers
-The business extents the production of products or services beyond the market in which it currently operates
-Occurs when the business increases its development potential and significantly reduces risk as the new products are aimed at existing customers
-Occurs when a business merges with a business that is at the same production stage but offer a different product
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Conglomerate diversification
-The business adds new products or services that are unrelated to existing products which may appeal to new groups of customers
-Occurs when the business operates multiple product lines
-The business grows into new products or services and markets
-Occurs when the business can increase overall proficiency by extending activities to unfamiliar markets
Advantages of diversification strategies
-Increase in sales and business growth
-Gain more technological capabilities through product modification
-Improve the brand of the business
-Establish additional new markets in unrelated industries
