A Business Encyclopedia

Expansion through Diversification

Definition: The Expansion through Diversification is followed when an organization aims at changing the business definition, i.e. either developing a new product or expanding into a new market, either individually or jointly. A firm adopts the expansion through diversification strategy, to prepare itself to overcome the economic downturns.

Generally, the diversification is made to set off the losses of one business with the profits of the other; that may have got affected due to the adverse market conditions. There are mainly two types of diversification strategies undertaken by the organization:

xpansion through diversification

  1. Concentric Diversification: When an organization acquires or develops a new product or service that are closely related to the organization’s existing range of products and services is called as a concentric diversification. For example, the shoe manufacturing company may acquire the leather manufacturing company with a view to entering into the new consumer markets and escalate sales.
  2. Conglomerate Diversification: When an organization expands itself into different areas, whether related or unrelated to its core business is called as a conglomerate diversification. Simply, conglomerate diversification is when the firm acquires or develops the product and services that may or may not be related to the existing range of product and services.

Generally, the firm follows this type of diversification through a merger or takeover or if the company wants to expand to cover the distinct market segments. ITC is the best example of conglomerate diversification.

Leave a Reply

Your email address will not be published. Required fields are marked *


Related pages

ganttsordinal utility functionmotivation hygiene theory definitioninvested capital turnovertypes of forex riskemployees provident fund contributiondefinition of deontological ethicsexamples of profitability ratiosstock split meaningpopulation proportion definitionassets in a companywhat is demand forecasting in managerial economicswhat is a multiplier in economicsneoclassical theory of organizationrbi open market operationsvam definitiondefine channel memberscheque clearing systemregiocentric exampleunique feature of oligopolydestabilizing speculationinterest rate swaps definitionelastic demand meaningexplain managerial griddefinition irrempowerment of employees definitioncheque clearing definitionpiecework ratesindifferance curveshrm definitioninductions definitionivan pavlov classical conditioning summarymain features of oligopolyfiscal deficit definitionhow to calculate total assets turnoverprimal and dual problemmodified internal rate of return examplewhat is a straddle positionbrand positioning adalahdematerialised shares meaningtypes of promotion mixretailing definitionholistically definitionpoaching meaningformula of fixed assets turnover ratiodefinition of abraham maslowhenry fayol managementfive porter forces analysiswhat is cluster sampling examplesfactors that influence elasticity of demandpiecework definitionunion bank neftdemand forecasting wikipediamarketing channel conflict examplesmclelland theorycapital budgeting techniquepolycentrism in businessimportant scaling techniquesdefine breakeven pointwhat does divestiture meandefine consumer equilibriummeaning divestmentkiosk banking meaningtheory of egoisminduction and orientation in hrmdefine demand functiondefinition of debentures in accountingherzberg motivation factorsoligopoly definition and examplesm commerce advantages and disadvantagescaptive pricing examplesfactors of promotion mix