What is horizontal diversification?

Horizontal diversification is one of several different types of diversification strategies that businesses and private investors can use to increase their efforts. As far as business is concerned, this type of diversification strategy involves creating products that may not be directly related to current consumers offered, but which is very likely to be attracted to the current client base of the company. This approach is somewhat different from other diversification methods, as it focuses on attracting new customers in different markets, but on the offer of a wider range of goods and services to a faithful customer base.

One example of horizontal diversification can be seen at the local dealer, who has a reputation for the sale of quality jewelry. As a means of increasing business, the retailer may decide to carry a number of fragrances in the store. This approach creates opportunities to sell perfumes, Cologne, and afterburve lotion for patrons who have already tradeThey visit high -quality jewelry for personal use or as gifts. When the strategy works, a customer who comes to choose a necklace as a birthday gift can also notice a fragrance line and decide to buy a bottle of perfume along with a necklace, allowing the shop owner to get a return from both product lines.

In many cases, a company that is involved in horizontal diversification, an in -depth evaluation of its current clientele will determine what other types of products can be willing to buy and continue to support the current product line. When identifying new and various products offered in addition to the traditional product line, factors such as location, gender and intake level will often be taken into account. Usually this approach is launched to the market for consumers as another benefit offered by a trusted enterprise that allows these consumers to meet with VOther than one need by buying a wider range of products from business. Assuming new products meet the quality and price requirements of clientele, there is a very good chance that this approach will be successful and the company will have more profits.

While the concept of horizontal diversification offers a number of benefits for business and its clientele, there is also a potential disadvantage. Since the focus is to sell new products to the existing client base, this strategy will not increase the scope of this base of customers. This means that any factors that adversely affect the purchasing power of these customers will also have a negative impact on the amount of sales generated. For this reason, many businesses will not only rely on horizontal diversification, but will also try to diversify ways that attract consumers associated with different age, gender economic demography.