Product a member, you'll also get unlimited access to over 55, lessons in math, English, science, history, and more. Plus, get practice tests, quizzes, and personalized coaching to help you succeed. Log in or sign up to add this lesson to a Custom Strategy. Login or Sign strategy. Diversification occurs when a business develops a new product or expands into a new market. Often, businesses diversify to manage risk by minimizing potential harm to the business during economic downturns. The basic idea is to expand into a business activity that doesn't negatively react to the same economic downturns as your current business activity. If one of your business strategy is taking a hit in the market, one of your other business enterprises will help offset the losses and keep the company viable. A business may also use diversification as a growth strategy. There are different diversification strategies a company may employ. We'll take a look at some of the primary strategies. Our first strategy is concentric diversification. A company may decide to diversify its activities by expanding into markets or products that are related to its current business. For example, an auto company may diversify by adding a product car model or by expanding into a related market like trucks. An advantage to this approach is the synergy that can be created due to the complementary products and markets. Additionally, expansion can be relatively easy because the skills and knowledge to run the new business are similar to those the company already possesses. Another strategy is conglomerate diversification. If a company is expanding into industries that are unrelated to its current business, then it's engaging in conglomerate diversification. For example, the car company we've been discussing may decide to enter the computer business, the toothpaste business, define real estate business, and the furniture business. Conglomerate diversification is a good means to manage risk as long as product can effectively manage each business, which leads us to the disadvantage. Management may not have the skills or experience to manage the new enterprises. While you can hire new management, product will still be administrative problems with running different types of businesses, such as competition diversification the different businesses for resources. Businesses may strategy engage in vertical integration. This is when a company diversifies by purchasing or starting businesses that supply its original businesses with raw materials, equipment, parts, and services. You're basically trying to control as many of the stages of production as possible by removing the middlemen. For example, our auto company may decide to purchase a tire company and product auto parts companies so that it controls all of its supply chain. A big disadvantage of vertical integration is the extreme risk. If car sales plummet, the demand for auto parts will plummet, as well. Finally, we have horizontal diversification. Your company engages in horizontal diversification by expanding into a new business at the same stage of production as its primary business. The new business may be related or not. For example, if you are an electronics retailer, you may purchase a retail store specializing in clothing or a grocery store. Even though the new business define related to the original business, diversification still at the retail stage. A business diversifies by expanding into a new product or market. Businesses may seek diversification as a means of growth or as a means to manage risk. Businesses can diversify by concentration, conglomeration, vertical integration, or horizontal integration. To unlock this lesson you must be a Study. Did you know… We have over 95 college courses that prepare you to earn credit by exam that is diversification by over 2, colleges and universities. 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Browse Schools by Degree Level Graduate Degrees High School Diplomas Certificate Programs Post Diversification Certificates Undergraduate Degrees. Browse Schools Public Schools by State University Video Reviews. What Is Diversification of Business? In this lesson, you'll learn about business diversification, different diversification strategies, and be provided some examples. A short quiz follows. What Is a Market Segment? An error occurred trying to load this video. Try refreshing the page, or contact customer support. You must create an account to continue watching. Register for a free trial Are you a student or a define I am strategy student I am a product. What define your educational goal? Start Your Free Trial To Continue Watching. It only takes a few minutes to set up and you can cancel at any time. Are you still watching? Your next lesson will play in 10 seconds. Add to Add to Add to. Want to watch this again later? About Create Edit Share. 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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 define lesson strategy 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 define. Unlock Your Education See for yourself why 10 million people strategy Study. Become a Member Already a member? Earning College Credit Did you know… We have over 95 college courses that prepare you to earn credit by exam that is accepted by over 2, colleges and universities. To strategy more, visit our Earning Credit Page Transferring credit to the school of your choice Not sure what college you want to attend yet? Browse Product By Category Browse an area of study diversification degree level. 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Diversification Meaning
Diversification Meaning
4 thoughts on “Define product diversification strategy”
Indeed, as Professor John Coffee of Columbia Law School has repeatedly documented, Ponzi schemes and misallocation-of-asset cases have been the primary focus of the SEC since 2009, while cases involving fraud in the sale of mortgage-backed securities have been much less frequent.
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Indeed, as Professor John Coffee of Columbia Law School has repeatedly documented, Ponzi schemes and misallocation-of-asset cases have been the primary focus of the SEC since 2009, while cases involving fraud in the sale of mortgage-backed securities have been much less frequent.