What is diversification?

What is diversification?

• A. It is the process of focusing on one product.
• B. It is merging with competitors in the same market.
• C. Diversification is when a business expands into new products or markets that are different from its existing activities.
• D. It reduces the variety of products offered.

Answer: (C)

Diversification means expanding into new products or new markets that are different from what the business currently does. This approach spreads risk across different areas and offers potential growth beyond existing activities, rather than concentrating on a single product or market. The statement that diversification involves moving into new products or markets that are different from current activities matches this idea precisely, which is why it’s the best description. Other options describe different strategies: focusing on one product is specialization, merging with competitors in the same market is integration within the same market, and reducing the product range is the opposite of diversification.

Diversification means expanding into new products or new markets that are different from what the business currently does. This approach spreads risk across different areas and offers potential growth beyond existing activities, rather than concentrating on a single product or market.

The statement that diversification involves moving into new products or markets that are different from current activities matches this idea precisely, which is why it’s the best description. Other options describe different strategies: focusing on one product is specialization, merging with competitors in the same market is integration within the same market, and reducing the product range is the opposite of diversification.