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The 3 directions of diversification

As mentioned earlier, the Diversification a strategic option of product policy. New markets are to be opened up with new products. New refers to new markets and new products from the company's point of view. For example, a product that has been on the market for a long time but has not yet been offered by the company can be considered new. Or a product that does not yet exist in a certain market but has already been introduced in other markets.

Horizontal, vertical and lateral diversification

Basically, the company 3 optionsto diversify:

The horizontal diversification
Horizontal diversification means that the company is expanding its range of services with new products that are similar to previous products and are at the same economic level. The new products are related to the old products. An example would be Nike bringing elegant men's shoes onto the market or a car manufacturer expanding its product range by purchasing other brands.

The vertical diversification
In the vertical diversification the company expands its Value chain. This can be done either in the direction of sales (e.g. by opening your own stores) or in the direction of production (a clothing company buys textile production companies).

The lateral diversification
The third option is that lateral diversification. The company is expanding its range of services to include products that are unrelated to its previous product range. This type of diversification occurs quite often, for example, large companies often buy smaller companies whose services have nothing to do with their own offer in order to expand their service repertoire. An example of such a conglomerate would be the Siemens Group, which, in addition to IT products, also sells traffic technology, medical technology, lighting and energy.

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  • Horizontal diversification: similar products, same economic level
  • Vertical diversification: expanding the value chain
  • Lateral diversification: completely different products