What is diversification in business?

• The company wants to achieve more revenue

• The company wants to lessen its economic risks

• The core business of the company is experiencing a decline

• The company wants to diversify to utilize and exploit potential synergies

Diversification can happen by launching or acquiring new products in a previously untapped market or industry. Launching and acquiring new products are most often the result of the following:

• Licensing deals

• Mergers

• Acquisitions

There are three main types of diversification, these include:

• Concentric diversification

  Concentric diversification concerns a growth strategy based on new or acquired products closely related to an organization's existing operations and products.

• Horizontal diversification

  Horizontal diversification refers to introducing new products or services into a marketplace while starting a new business in the process. These new products or services are still intended to appeal to the organization's existing target consumer base.

• Conglomerate diversification

  This type of diversification happens when a company enters a new market with a product launch or new product line that does not relate to its current market space, industry, or product line.

  These are usually big jumps in terms of what a company sells, like if an electronic company wants to break into the clothing and apparel market.