Horizontal Diversification versus Product Development. What's the Difference?

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Sanjit Keskar
Professor, India

Horizontal Diversification versus Product Development. What's the Difference?

🔥NEW From the summary article on this site about the Ansoff Matrix.
Product Development. Sell new products or services in current markets. These can be accessories, add-ons, or completely new products...
Horizontal diversification. This occurs when the company acquires or develops new products that could appeal to its current customer groups even though those new products may be technologically unrelated to the existing product lines.
Both seem to be saying the same thing as far as completely new products and existing market (current customer groups).
So where is the difference? And isn't diversification also about new markets - so where is the new markets in horizontal diversification?

  Jaap de Jonge
Editor, Netherlands
 

Product Development versus Horizontal Diversification

Good question.
First of all, BOTH of these strategies are dealing with a situation of a business firm attempting to market NEW PRODUCTS (or services).
  • As the summary states correctly, in the case of a product development strategy a la Ansoff, we are aiming to sell NEW PRODUCTS IN THE CURRENT MARKET.
  • In the case of diversification we are aiming to sell NEW PRODUCTS IN A NEW MARKET.
  • In case of horizontal diversification the clients are the same. Because horizontal diversification involves providing NEW PRODUCTS IN A NEW MARKET TO EXISTING CONSUMERS. For example, a cosmetics firm aims to enter the jewelry market by marketing these jewelries to its loyal cosmetics customer base.
Remember to pay attention to the subtle difference between "clients" and "markets". Hope this helps..

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