What does conglomerate diversification involve?

Conglomerate diversification involves a company entering into new markets or industries that are distinct from its existing operations. This strategy allows a business to expand its reach and reduce risk by not relying solely on its current product lines or markets. By moving into unrelated sectors, a company can leverage its resources, capabilities, and management expertise in different contexts, potentially tapping into new customer bases and revenue streams.

This approach is often used by firms looking to mitigate risks associated with economic downturns or market fluctuations in their core industries, since different industries may not be affected by the same economic factors. It also provides opportunities for growth by exploring new business opportunities that can lead to increased profitability and market presence.

In contrast, other options focus either on existing products or markets, which does not capture the essence of conglomerate diversification. Reducing the workforce pertains to operational cuts rather than strategic expansion, thus making it unrelated to the concept of diversification.