product diversification is a strategy employed by a company to increase profitabilityprofitability ratiosprofitability ratios are financial metrics used by analysts and investors to measure and evaluate the ability of a company to generate income (profit) relative to revenue, balance sheet assets, operating costs, and shareholders’ equity during a specific period of time. diversification can occur at the business level or at the corporate levelcorporate structurecorporate structure refers to the organization of different departments or business units within a company. business-level product diversification – expanding into a new segment of an industry that the company is already operating in. for example, when a computer company that primarily produces desktop computers starts manufacturing laptops, it is pursuing a concentric diversification strategy. for example, a notebook manufacturer that enters the pen market is pursuing a horizontal diversification strategy. for example, if a computer company decides to produce notebooks, the company is pursuing a conglomerate diversification strategy.
conglomerate diversification requires the company to enter a new market and sell products or services to a new consumer base. additionally, the probability of failure is much greater in a conglomerate diversification strategy. therefore, companies should only pursue a diversification strategy when their current market demonstrates slow or stagnant future opportunities for growth. general electric commonly comes into discussions when talking about successful diversification stories. walt disney company successfully diversified from its core animation business to theme parks, cruise lines, resorts, tv broadcasting, live entertainment, and more. cfi’s mission is to empower anyone to become a great financial analyst through our financial modeling & valuation analyst programfmva® certificationjoin 350,600+ students who work for companies like amazon, j.p. morgan, and ferrari .
use this brief guide to help you unpack the four types of diversification and the strategies that align with each one. the strategy might include adding new products or services, venturing into an untapped market, or seeking new customer groups (or a combination of the aforementioned) – all with a growth objective in mind. let’s drill down on what they are as well as the pros and cons of each… 1. horizontal diversification – horizontal diversification happens when a business adds a product or service offering outside of its current line that has an affinity that would likely appeal to its customer base. forward vertical diversification attempts to find advantages closer to the integration when a company is at the end of the supply chain.
backward vertical diversification is when the business at the end of the supply chain looks to find growth opportunities upstream. 4. conglomerate diversification – conglomerate diversification is a type of growth strategy that strives to add new product or service offerings that are different than the present product or service, usually totally unrelated to the business’s current business. with competition tight and technology the landscape at a fever pitch, diversification strategy is often the only way to reach growth goals and, at the very least, stay afloat. the good news is spring-green takes the guesswork out of owning a business. this information is not intended as an offer to sell, or the solicitation of an offer to buy, a franchise.
there are three types of diversification techniques: concentric diversification. concentric diversification involves adding similar products or services to the existing business. horizontal diversification. conglomerate diversification. general electric. walt disney. types of diversification. diversification is a strategic approach adopting different forms. depending on the applied what is diversification? – there are many ways that a business can diversify. the strategy might include, .
the three types of diversification strategies include the concentric, horizontal and conglomerate. diversification is a there are three types of diversification: concentric, horizontal, and conglomerate. concentric diversification. this different types of diversification strategy horizontal diversification concentric diversification.,
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