Strategy · business glossary
What is Diversification?
By Shivam Bhandari · Reviewed 31 October 2026 · How we write
definition
Expanding into new products, markets, or business lines to reduce dependence on any single source of revenue.
Diversification explained
Diversification means expanding into new products, markets or industries to grow or reduce risk.
example
A dairy cooperative adding chocolates, ice cream and beverages.
why it matters
It spreads risk and opens new growth, especially when the core market is saturated.
common mistake
Diversifying into unrelated areas before the core business is strong.
Frequently asked questions
What is Diversification?
Expanding into new products, markets, or business lines to reduce dependence on any single source of revenue. Diversification means expanding into new products, markets or industries to grow or reduce risk.
Why does Diversification matter?
It spreads risk and opens new growth, especially when the core market is saturated.
What is a common mistake with Diversification?
Diversifying into unrelated areas before the core business is strong.
Related terms
Core competency
The specific capability a business does better than almost anyone else, and which its strategy should be built around.
Market segmentation
Dividing a broad market into smaller groups of customers who share similar needs, so messaging and offers can be tailored to each.
Pivot
A significant, deliberate change in business model or direction, usually made after learning the original approach isn't working.