Diversification Strategy - Meaning, Types, Vertical & Horizontal Diversification with examples (225)

View all our courses and get certified on https://academy.marketing91.com A diversification Strategy is an approach adopted by an organization to extend a new product line and operate in different markets. The Diversification Strategy is a growth strategy that helps organizations to capture new markets and create a new customer base. The Ansoff Matrix The Ansoff Matrix is a planning tool that lays the groundwork for marketers and senior executives so that they can create a strategy for future growth. Types of Diversification Strategy Horizontal diversification An organization uses Horizontal diversification when it decides to add new products or services to its unrelated product list. The risk is less as the company can use its existing supply chain as well as customer base to achieve sales. Example – Apple Watch from Apple Concentric diversification An organization uses Concentric diversification when it decides to enter a new product into a new market.  The company takes advantage of existing manufacturing processes, technical experience, and industry knowledge to boost sales. Example – Apple using the technical knowledge of iPhone to launch iPad Conglomerate diversification An organization uses Conglomerate diversification when it decides to target a different market as well as customer base with unrelated product. Example – 1. Amazon Web Services 2. Tesla – Electric Cars to Space X Vertical diversification An organization uses Vertical diversification when it decides to align two or more production stages to move up or down the supply chain. These were earlier operated by other companies but now the organization decides to take over the functioning. Forward Vertical Diversification Forward Vertical Diversification occurs when the organization is at the starting point of the supply chain and wants to control the operations that are further down the chain. Example – McDonald’s Backward Vertical Diversification Backward Vertical Diversification occurs when the organization is at the end of the supply chain and expands its role by purchasing a company that supplies the product needed for production. Example – Walmart Reasons for Diversification Increase revenue growth Tap more markets Use existing customer base, resources, and brand recognition Low risks Economies of scale Maintain profitability Cross-selling Gain technological capabilities Optimize resources Diversification Strategy Example 1. Apple Car This video is on Diversification Strategy and it has the following sub-topics. Time Stamps 0:00 Diversification Strategy Introduction 00:21 What is Diversification Strategy? 00:51 The Ansoff Matrix 01:56 Types of Diversification Strategy 02:01 Horizontal diversification 02:30 Concentric diversification 02:55 Conglomerate diversification 03:14 Example 1 - Amazon’s - Amazon Web Services (AWS) 03:28 Example 2: Tesla – Electric Cars to Space X 04:02 Vertical diversification 04:32 Forward Vertical Diversification 05:14 Backward Vertical Diversification 05:37 Reasons for Diversification 06:08 Diversification Strategy Example 06:11 Diversification Strategy Example – Apple Car