Diversification (marketing strategy)

[2] Note: The notion of diversification depends on the subjective interpretation of “new” market and “new” product, which should reflect the perceptions of customers rather than managers.

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.

This also helps the company to tap that part of the market which remains untapped, and which presents an opportunity to earn profits.

Horizontal integration occurs when a firm enters a new business (either related or unrelated) at the same stage of production as its current operations.

Conglomerate diversification involves adding new products or services that are significantly unrelated and with no technological or commercial similarities.

Going into an unknown market with an unfamiliar product offering means a lack of experience in the new skills and techniques required.

Moreover, diversification might necessitate significant expanding of human and financial resources, which may detract focus, commitment, and sustained investments in the core industries.

In order to measure the chances of success, different tests can be done:[5] Because of the high risks explained above, many companies attempting to diversify have led to failure.