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Definition: Diversification

Diversification is a kind of corporate strategy. It is used to expand firms' operations by adding markets, products, services, or stages of production to the existing business. The purpose of diversification is to allow the company to enter lines of business that are different from current operations.

Functionally there are two types of diversification:

  • Concentric diversification:  When the new venture is strategically related to the existing lines of business
  • Conglomerate diversification: When the new and old businesses are unrelated

According to Ansoff matrix, diversification usually requires a company to acquire new skills, new techniques and new facilities.

Ansoff Matrix

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