Diversification is actually a way that allows any company to enter or to establish new lines. In other words we cay that diversification is a way that broaden the segments of any company. It helps in expanding the growth of a company by extending the lines of products, services and various markets. Diversification can be a positive strategy for a company and it can be a negative one. All it depends on the company how it adopt the strategies while implementing them and how they work. While implementing the diversification strategies, differences do arise that can lead towards two situations. Either it can be a positive one or it can generate some negative outcomes two. In order to make the diversification a positive one, companies should try to adopt these strategies ethically as well as efficiently.
In order to have growth and sustainability, diversification is adopted by most of the companies. What actually executives believe is bigger is better and in order to have better diversification should be implemented. The diversification is categorized in two major parts:
Internal diversification is something when a company tries to enter in a new market that is somehow related to the existing one. Whereas in external diversification, company enters into a new business line that is totally different from the existing one. Both are important and require equal attention.
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Marlin, Dan, Bruce T. Lamont, and Scott W. Geiger. (2004), "Diversification Strategy and Top Management Team Fit." Journal of Managerial Issues, pg 361.