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Diversification Is A Corporate Strategy To Enter Into A New Market or

Diversification is a corporate strategy where a business enters a new market or industry that it is not currently in by creating a new product for that market. This is the riskiest part of Ansoff's Product/Market Matrix as the business has no experience in the new market and does not know if the product will succeed. Diversification requires acquiring new skills, knowledge, resources, technologies, and facilities, exposing the organization to higher levels of risk. There are three types of diversification: concentric involves leveraging existing technical know-how; horizontal adds new unrelated products appealing to current customers; and conglomerate diversifies into totally unrelated areas.

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43 views

Diversification Is A Corporate Strategy To Enter Into A New Market or

Diversification is a corporate strategy where a business enters a new market or industry that it is not currently in by creating a new product for that market. This is the riskiest part of Ansoff's Product/Market Matrix as the business has no experience in the new market and does not know if the product will succeed. Diversification requires acquiring new skills, knowledge, resources, technologies, and facilities, exposing the organization to higher levels of risk. There are three types of diversification: concentric involves leveraging existing technical know-how; horizontal adds new unrelated products appealing to current customers; and conglomerate diversifies into totally unrelated areas.

Uploaded by

rajesshpatel
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Diversification is a corporate strategy to enter into a new market or

industry which the business is not currently in, whilst also creating a new
product for that new market. This is most risky section of the An off Matrix,
as the business has no experience in the new market and does not know if
the product is going to be successful.

Diversification is one of the four main growth strategies defined by Igor


Ansoff's Product/Market matrix:[1]

An off pointed out that a diversification strategy stands apart from the other
three strategies. Whereas, the first three strategies are usually pursued with
the same technical, financial, and merchandising resources used for the
original product line, the diversification usually requires a company to
acquire new skills and knowledge in product development as well as new
insights into market behavior simultaneously. This not only requires the
acquisition of new skills and knowledge, but also requires the company to
acquire new resources including new technologies and new facilities, which
exposes the organization to higher levels of risk.

There are three types of diversification: concentric, horizontal, and


conglomerate.

Concentric diversification [edit]

This means that there is a technological similarity between the industries,


which means that the firm is able to leverage its technical know-how to gain
some advantage. For example, a company that manufactures industrial
adhesives might decide to diversify into adhesives to be sold via retailers.
The technology would be the same but the marketing effort would need to
change.
It also seems to increase its market share to launch a new product that helps
the particular company to earn profit. For instance, the addition of tomato
ketchup and sauce to the existing "Maggi" brand processed items of Food
Specialities Ltd. is an example of technological-related concentric
diversification.
The company could seek new products that have technological or marketing
synergies with existing product lines appealing to a new group of customers.
This also helps the company to tap that part of the market which remains
untapped, and which presents an opportunity to earn profits.

Horizontal diversification [edit]

The company adds new products or services that are often technologically or
commercially unrelated to current products but that may appeal to current
customers. This strategy tends to increase the firm's dependence on certain
market segments. For example, a company that was making notebooks
earlier may also enter the pen market with its new product.

Conglomerate Diversification

Conglomerate diversification is growth strategy that involves adding new


products or services that are significantly different from the organization's
present products or services. Conglomerat diversification occurs when the
firm diversifies into an area(s) totally unrelated to the organization current
business.

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