Another important and leading diversification strategy is known as concentric diversification. In order to know the activities, functions, programs and movements of any business portfolios are prepare in order to evaluate the actual position of any firm or business. Concentric diversification thus deals in preparing the portfolios of the respective businesses. Normally portfolio of a business is prepared by an internally creating new and innovative business unit. Whereas, in concentric diversification, acquisition is followed in order to prepare the portfolios for any business. This type of diversification helps in maintaining a record of any firm or business in order to evaluate the performance as well as the present situation on which future is empirically dependant. Along with this, when similarities exist in any business, concentric diversification takes place in order to broaden them to generate effective and potential outcomes.
This diversification helps a firm or any business in various ways:

1. Helps in developing new products

2. Provide various advantages while re-engineering existing products

3. Helps in increasing the market share of any firm or business

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In this type of diversification, the technology no doubt remains the same but various new varieties are added in it in order to make it more beneficial. Marketing plan plays an important role in concentric diversification. While using this strategy, the market plan changes in order to introduce some thing different with the help of the existing technologies. What actually is required are the similarities between the technology of two businesses. If this is present, then any firm or business can use this strategy in order to generate effective outcomes.

Stakeholders use this strategy to introduce new and different to their consumers so that they can get attracted towards the business line and can helps in generating huge and potential profits for the firm.

References

Pearce "Strategic Management: Formulation, Implementation And Control", Tata McGraw-Hill