Diversification is a strategy of moving into new lines of business by entering new markets or industries with new products that are either related or completely unrelated to a company’s existing offering. The purpose of diversification is usually to reduce portfolio risk. Diversification is, just like Market Penetration, Market Development and Product Development, a growth strategy as defined by Igor Ansoff in his Product/Market matrix. From the four growth strategies it is the most risky one, since the company has no experience in the new market and does not know if the product is going to be successful.

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