Concentric, Horizontal, and Conglomerate

Diversification
Concentric diversity concerns a growth strategy where any new or acquired
products are closely related to existing products or to the company's core
competencies. This approach allows the company to employ resources and
take advantage of existing competencies in introducing the new product. The
new products will generally relate closely to existing products or product lines
with the purpose of leveraging brand awareness and customer loyalty. It
generally involves targeting previously identified market segments that have
not been fully addressed.

Horizontal diversification concerns the introduction of new products to a new

market segment (generally forming a new business in the process). The new
products and business, however, are designed to appeal to an existing
customer base. As with concentric diversification, the new products will be
closely related to existing products. This strategy depends heavily upon
customer loyalty for existing products to transfer over to the new products and
business. An example of horizontal diversification is the when company A,
which makes laundry detergent, seeks to enter the market for selling washing
machines. Brand recognition and customer loyalty for the detergent may carry
over to the business of selling washing machines.

Conglomerate diversification involves launching a new product or product

lines that are unrelated to existing products, resources, or core competencies.
The company will generally attempt to leverage any brand recognition or
customer loyalty in the new market. An example would be Company A, which
sells electronics, venture into selling clothing apparel.