IGCSE Business Studies Practice Exam 2025 - Free Business Studies Questions and Study Guide

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What does diversification in business refer to?

Reducing operational costs

Focusing on a single product line

Expanding into new products or markets

Diversification in business refers to the strategy of expanding into new products or markets. This approach allows a company to reduce its risk by not relying solely on one product or market segment. By offering a variety of products or entering different markets, businesses can increase revenue streams, tap into new customer bases, and enhance overall stability.

For instance, if a company that primarily sells electronics decides to start offering home appliances, it is diversifying its offerings. This not only mitigates risk but also capitalizes on potential growth opportunities outside of its original market. Diversification is a proactive strategy aimed at growth and risk management, showcasing the versatility and adaptability of the business in response to market changes or customer demands.

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Streamlining existing services

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