Tashkent institute of finance independent work

Diversification

Diversification is an area included in the Ansoff Matrix strategy, where the most risk for a business is situated. This is due to the use of a new product being introduced to a new market, so there are no already existing target markets or competition. There are two types of diversification, vertical and horizontal. Horizontal diversification is when a new product is introduced but doesn’t contribute to the already existing product line. Meaning horizontal diversification focuses more on product that the business has knowledge about, whereas vertical diversification focuses more on the introduction of new product onto new markets, where the business could have less knowledge of the ne market. A benefit of horizontal diversification is that it is an open platform for a business to expand and build away from the already existing market. A disadvantage of using a Diversification strategy is that the benefits could take a while to start showing, which could lead the business to believing that the strategy doesn’t work. Another disadvantage or risk is, it has been shown that using the horizontal diversification method has become harmful for stock value, but using the vertical diversification had the best effects.