What Are the Types of Diversification Strategies?

Diversification strategy refers to the strategy for companies to selectively enter new business areas in order to occupy more markets and develop new markets, or to avoid the risk of operating a single business. ^[1]

Diversification Strategy

Enterprises adopting a diversified strategy can occupy more markets and develop new markets, and can also avoid the risk of single operations.

Product diversification means that the newly produced products of the company span multiple industries that are not necessarily related, and the production is mostly serial products; so-called market diversification refers to the company's products in multiple markets, including domestic Market and

The continuous development of the social economy has caused changes in market demand and the operating structure of enterprises. In order to occupy more markets and develop new markets, or to avoid the risk of a single operation, companies often choose to enter other related fields. This strategy is a diversification strategy. The type of diversification strategy is also different. It is necessary for home textile companies to choose the appropriate type of diversification strategy to meet their development needs. The types of home textile enterprise diversification strategies are as follows.

Related Diversity

Relevant diversification, also known as concentric diversification, means that although the business developed by the home textile enterprise has new characteristics, it has strategic adaptability to the existing business of the enterprise. Products and other aspects have the same or similar characteristics. According to the difference between the "associated content" between the existing business and the new business, related diversification can be divided into two types: concentric diversification and horizontal diversification.

(1) Concentric diversity. That is, home textile companies use existing technology, expertise, experience, etc. to develop new products, increase product types, and expand business scope from the same center. Rumeng Home Textiles not only makes bedding, but also produces mattresses. Concentric diversification is characterized by different basic uses of the original product and the new product, but with strong technical relevance.

(2) Horizontal diversification. That is, home textile enterprises use the existing home textile market to adopt different technologies to develop new products and increase product categories. For example, Shanghai Yimanqi not only makes bedding, but also develops new categories such as curtains and fabric sofas that are related to home textiles but have different technologies. The characteristic of horizontal diversification is that the basic use of existing products is different from that of new products, but there is a strong market correlation to use the original distribution channels to sell new products.

Irrelevant diversification

Irrelevant diversification, also known as group diversification, means that home textile companies expand their business areas into other industries through acquisitions, mergers and acquisitions, or investments in other industries. New products, new businesses and existing businesses Business, technology, and market have nothing to do. That is to say, home textile enterprises are neither relying on the original technology nor the existing market, and are developing products or labor services with completely different technologies and markets. This strategy is a strategy adopted by powerful large enterprise groups. In the home textile industry, such as Vosges Group and Shengyu Group are typical cases. ^[2]