Question

Generally diversification is classified in

• A. Two ways
• B. Three ways
• C. Four ways
• D. Five ways

Hint:

Remember the four categories of diversification: Horizontal (same market, new product), Vertical (same industry, different stage), Concentric (related industry), and Conglomerate (unrelated industry).

Answer 1

The Correct Option is C

Step 1: Understanding the Question:
The question asks about the general classification of business diversification strategies. Diversification is a corporate strategy to enter into a new market or industry in which the business doesn't currently operate.
Step 2: Key Concept:
Business diversification is broadly categorized based on the relationship between the new business and the firm's existing business.
Step 3: Detailed Explanation:
The four main types of diversification are:

Horizontal Diversification: Introducing a new product or service that is related to the firm's existing products and is sold to the same customer base. For example, a company making notebooks starting to sell pens.

Vertical Diversification: Expanding the business into areas that are at different points on the same production path, such as when a manufacturer owns its supplier or distributor. This can be backward (owning a supplier) or forward (owning a retailer).

Concentric Diversification: Introducing a new product or service that has technological or marketing synergies with existing product lines, even though it may be aimed at a new customer group. For example, a company making laptops starting to manufacture tablets.

Conglomerate Diversification: Entering a new market or industry that is unrelated to the firm's current business activities. For example, a car manufacturer acquiring a food products company.

Step 4: Final Answer:
As there are four primary classifications, the correct answer is (C).