Question

What are the three ways of company can enter a new business to achieve diversification? Which of these is best when a company needs to diversify into a new industry? why?

Answer 1

Diversification can be defined as the strategies to enter into the new trade or market. Entering into diversification is a risky process which needs proper market research. Three ways through which a business can achieve diversification are: market penetration, product development and market expansion.
Among these three ways market penetration is the best way to achieve diversification. Though market penetration is not meant to enter into new trade but it is the most important aspect for growth strategy making procedures as it helps to understand the demands of the new products. Through this market penetration strategy, entrepreneurs can measure the requirements and demands of the new services or products from the consumers. If product selling is going as per the expectation, then entrepreneurs can think about the next level of diversification strategy which is market expansion and product development. Market penetration indicates selling new products into existing markets to obtain higher service or product shares.