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Diversification refers to entering attractive opportunities which are outside the existing business of the firm. when a firm identifies a highly attractive industry and when the requisite business mix strengths are already present in it, it has an attractive business opportunity for diversification. three types of diversification are :

1. Concentric diversification: the new products have technological and/or marketing synergies with existing product lines, though the target groups of customers are entirely different, e.g an audiocassette manufacturer introduce computer tape manufacture.

2.Horizontal diversification : the new product appeal to the existing customers though the products are technologically unrelated to existing product audiocassette manufacturer starts manufacturing cassette holding trays, though it requires different technology and process.

3.Conglomerate diversification: the new products or business have no relationship to the existing technology,products or market of the firm. an audiocassette manufacturer enters into fax machines or diet products business.

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