It is frequently used in the field of commerce to name the strategy adopted by certain companies with respect to their product offerings. If a company X focused its proposal on two types of products, diversification will mean that it will offer a greater quantity.
The main goal of diversification is risk reduction. It is easier for one product to fail on the market than five that do not work. In addition to minimizing risk, diversification aims to take advantage of the prestige and image of a brand for additional benefits. Another aspect of business diversification is the search for new markets. It is a characteristic trend of business, investment and commercial activity in general.
A person can also have a diversification strategy in their investments. Instead of putting your money in a mutual fund, you decide to invest in several entities. The loss of a part of the investment will not imply the entire investment.
In short, we try to say that diversifying is protecting against what we do not know, in terms of losses, but at the same time in most cases it limits the possibility of a higher profit: the lower the risk, the lower the profit, because theoretically, if you know a specific industry or sector, it is easier to take advantage of that knowledge to obtain benefits without the need to diversify, I repeat, theoretically.
Called related diversification which seeks to combine the activities previews new and in a way that gives better results than would occur separately. This can be achieved thanks to technological compatibility. between the two, or because they share certain aspects of their marketing. It is possible to distinguish two types of related diversification: vertical and horizontal integration.
