What is 'business diversification'?

Business diversification refers to a strategy companies utilize to expand their operations into new markets or product lines. This technique is often employed to reduce risk and enhance growth potential. By not relying solely on existing markets or products, businesses can spread their risk across different areas, thus decreasing the impact of potential downturns in specific sectors. Diversification can take many forms, including entering new geographical markets, developing new products, or acquiring businesses that operate in different segments.

The other options, while related to various business strategies, do not encapsulate the essence of diversification. Focusing on new technologies pertains more specifically to innovation strategy, minimizing advertising expenses relates to cost management, and improving customer service is about enhancing customer relationships and experience. None of these strategies necessarily involve expanding into different markets or product categories, which is the core concept of business diversification.