What does diversification mean in economics?

What does diversification mean in economics?

Economic diversification can be defined as the shift toward a more varied structure of domestic production and trade with a view to increasing productivity, creating jobs and providing the base for sustained poverty-reducing growth.

What is a good definition of diversification?

Diversification is a technique that reduces risk by allocating investments across various financial instruments, industries, and other categories. It aims to maximize returns by investing in different areas that would each react differently to the same event.

What are the two types of diversification?

Diversification Strategies

  • Concentric diversification. Concentric diversification involves adding similar products or services to the existing business.
  • Horizontal diversification. Horizontal diversification involves providing new and unrelated products or services to existing consumers.
  • Conglomerate diversification.

What is diversification with example?

Concentric diversification refers to the development of new products and services that are similar to the ones you already sell. For example, an orange juice brand releases a new “smooth” orange juice drink alongside it’s hero product, the orange juice “with bits”.

What is diversification What are its types and explain reasons for diversification?

Diversification is a strategy for growth through branching out into a new market segment, allowing your business to expand its presence and occupy a totally new space. This is achieved through expanding (or diversifying) your product or service offering to target new customers and grow profits.

What is diversification in business?

Diversification is a business development strategy in which a company develops new products and services, or enters new markets, beyond its existing ones. Diversification strategy can kick-start a struggling business, or it can further extend the success of already highly profitable companies.

What is a good definition of diversification quizlet?

Define diversification. Diversification refers to the expansion of an existing firm into another product line or market. It may be related or unrelated. It allows firms to expand their product lines and operating in several different economic markets.

What are the 3 forms of diversification?

There are three types of diversification: concentric, horizontal, and conglomerate.

Which is the best example of related diversification?

Apple. One of the most famous companies in the world, Apple Inc. is perhaps the greatest example of a “related diversification” model. Related diversification means there are notable commonalities between the existing products and services, and the new ones being developed.

What is related linked strategy?

With a related constrained strategy, a firm shares resources and activities between its businesses. Related Linked (mixed related & unrelated) : Less than 70% revenue comes from the dominant business & there are no common links between businesses.

We can say that diversification is a growth and development strategy of your business by exploring new possibilities. When you follow this strategy, you diversify the product portfolio and increase the horizon of your business. Most importantly, it helps the company to amplify sales and profitability.

What is the difference between related and Unrelated Diversification?

Related diversification is when a company operates several businesses that are linked together in some way or has several related product lines. Unrelated diversification occurs when an organization attempts to diversify into the industries and businesses that hold the promise of the most financial gain for an organization.

What are the risks of diversification strategy?

The risks of diversification strategy Unlike market penetration strategy, diversification strategy is considered high risk not only because of the inherent risks associated with developing new products, but also because of the business’s lack of experience working within the new market.

Which is the world’s lead diversifying company?

GE diversified its product portfolio into various industries like healthcare, aviation, oil and gas, transportation, water, power, and many others. In other words, we can say that General Electric is the world’s lead diversifying company.

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