When we think about business expansion we should think about the direction of the expansion. For example is the expansion whitening the market, in other words generating similar products and selling in similar markets? In other words, is it doing more of the same with more variations but essentially competing in the same market?
Alternatively, we may think of business expansion in a vertical sense. It may be that the business wishes to invest in the source of raw materials that is vertically backwards, moving back from the business as it is today towards its sources of supply. Alternatively, it may expand towards the market, we call this vertical forward integration. In this case, the business may invest in outlets that will sell its output.
This video will consider issues associated with diversification and attempt to classify diversification as vertical or horizontal.
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