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Diversification Strategies

15 January, 2016 - 09:21

LEARNING OBJECTIVES

  1. Explain the concept of diversification.
  2. Be able to apply the three tests for diversification.
  3. Distinguish related and unrelated diversification.

Firms using diversification strategies enter entirely new industries. While vertical integration involves a firm moving into a new part of a value chain that it is already is within, diversification requires moving into new value chains. Many firms accomplish this through a merger or an acquisition, while others expand into new industries without the involvement of another firm.