What is the diversification of trade?
Trade diversification is a process by which a business, a nation or other economic entity offers a number of different products or services, unlike specialization, only one. The theory is that by offering a wider range of products through diversification of trade, the company can appeal to more customers and therefore sell more products. For example, a cosmetic company that specializes in female hair products that introduces another range of men for men is expanding its customer base by providing a more diverse range of products. Larger economic entities can also significantly benefit from trade diversification. For example, a nation with an economy that is entirely dependent on corn can be paralyzed by a poor vegetation period, while an economy with different agricultural and manufacturing sectors could easily survive such unfavorable conditions.
Many different factors can lead to trade diversification. For example, trade can happen quite a succkemessenting with one product and take advantage of its successto put another product under the same brand. The development of new technologies can also lead to diversification because technological progress often allows the development of new products. In some cases, diversification can lead the enterprise to further success, thus providing the basis for further diversification.
There are many different types of trade diversification that a business or other economic entity can try. For example, in a concentric diversification, the company introduces new products that use similar components and technology to a new commercial area - a successful furniture company, which, for example, provides tables and chairs for restaurants, can begin to produce office and home furniture. Similarly, in horizontal diversification, the company introduces new products or services that users of their current products and services can consider useful. In addition, lateral d occursAnyway, when an enterprise is trying to introduce a new product or service that is not entirely related to their current customers, products or services.
In many cases, trade diversification can be quite risky. Business must generally spend a lot of time, money and market research in the introduction of a new product or service. Also, if the new product is not obviously better than others on the market, the company must have a well -known and respected brand to successfully introduce something new in the competitive market.
On a larger scale, whole nations or other large economic entities could undergo diversification of trade by developing new economic sectors. This is generally good, because it reduces relies on the specific economic sector. In some cases, the new technology or the use of newly found natural resources may push the nation to the trade diversificatin. In others, the government could offer business incentives or store tariffs that support the development of certain industrial sectorsí, which leads to diversification.