Business Diversification Strategy

Expanding a business can be quite hard so business owners and their teams tend to use a diversification strategy to be able to increase their sales and be successful in their expansion.

The business diversification strategy is what companies’ do (increasing the sales volume) in order to increase their profits.

The increase in the volume of sales can be done by developing new products and targeting new market. The diversification strategy can be used at the unit level of a business as well as in their corporate level. In a company expansion in unit level of a business, the strategy can be a new segment idea that is related exactly to the existing business. For the corporate level, the new business can be without relation to the existing business.

Different Types of Diversification Strategies

There are three basic types of diversification strategies that may composed of several plans that range from the designed and development of new products to the licensing of these new technologies. They may also be a combination of these plans with two or more of it included. They are the concentric diversification where the technology stays the same while its marketing plan alters significantly. The technical knowledge is an edge when it comes to this type of strategy.

The next one is called horizontal diversification. In this type, the technology used is somehow far from the existing business. Though the new products are not related to the existing ones, the customers who are loyal still patronized the products. This is very effective when a business have many loyal customers. Last but not the least is the lateral diversification. This strategy is almost similar to the horizontal diversification. The only thing that differentiates it from horizontal diversification is that lateral strategy targets new customers instead of targeting their existing loyal customers.

Diversification’s Advantages and Disadvantages

When using the business diversification strategy, you must consider some things to succeed. Diversification can really help businesses achieve its full potential in the market. It helps the company increase their customers by attracting new ones and retaining loyal ones. Furthermore, it enhances the product portfolio of the business by launching products which compliments their existing products in the market. Nevertheless, the company must hire or have sufficient knowledge about diversification so that no problem can arise in the future. The management team of the company must be well trained and educated about the processes that must be followed. Lack of information and knowledge about the latest trend in the market can really be upsetting in your business’ goals. You must ensure that all are taken care of and you have the ability and capability of handling those things. If not, hire someone who is a professional in this kind of situation.


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