Leveraging a market diversification strategy can help companies drive growth and survive an upcoming recession.
What Exactly Is Market Diversification?
Diversification is a corporate business strategy where a business can enter into a new industry or market, creating a new product for this market and further diversify their offerings.
Popular Diversification Strategies
There are three significant types of diversification techniques that businesses can utilize when trying to expand their current market.
1. Concentric Diversification
Concentric diversification is when a company adds a similar service or product to their existing business model. A great example is Apple, which started building desktops, branched out to laptops and music devices, and is now a leading retailer for Smartphone devices with their popular iPhone.
2. Horizontal Diversification
A horizontal diversification model involves adding new, unrelated services or products and offering them to existing customers. For example, when Amazon.com acquired Whole Foods, this is a horizontal diversification strategy because they were able to offer existing customers organic food products.
3. Conglomerate Diversification
Conglomerate diversification is when a company adds new services or products that are entirely unrelated. A superb example is Disney that went from films to creating and operating entertainment parks.
Companies usually diversify to help earn higher profits, but also to recession-proof their business model, as this can mitigate risks in the event of an industry downtown.
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