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Diversification is the fourth and final strategy in the Ansoff Matrix. It involves launching new products in new markets — making it the highest-risk growth strategy because the business has no existing experience with either the product or the customer base. Despite this risk, diversification can offer significant strategic benefits when executed well. This lesson examines the different types of diversification, the reasons businesses pursue it, the risks involved, and the conditions under which it makes strategic sense.
Diversification is not a single strategy — it exists on a spectrum from closely related extensions of existing business to entirely unrelated ventures.
Related diversification involves moving into a new product or market that has some strategic connection to the existing business. The connection might be through shared technology, similar customers, overlapping supply chains, or complementary capabilities.
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