Lateral diversification

Lateral diversification is a company's strategy to expand the range of products or services it produces. In contrast to vertical diversification it is not about upstream or downstream production stages, but about completely new markets.

Definition / explanation

Lateral diversification is the most innovative and far-reaching type of diversification strategy: the company enters new markets with new products or services that have no connection whatsoever with the previous core business.

Reasons for this can be, for example, a pronounced weak growth in the previous product portfolio or technological breaks that make the company's previous performance world appear obsolete.

example - A car manufacturer is now producing refrigerators.

In this context, the term “lateral” comes from Latin and means something like “flank” - the lateral diversification thus opens up a new flank or a new field of activity with new products.

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