What is business diversification?

Business diversification refers to a strategy where a company expands its operations into different markets or industries beyond its current offerings. This approach is taken to mitigate risks associated with relying heavily on a single market or product line. By entering new markets or introducing new products, a business can create additional revenue streams, which can be particularly beneficial if its existing market faces challenges such as decreasing demand or increased competition.

For instance, a company known for producing consumer electronics may diversify by entering the home appliance market. This allows the company to tap into a new customer base while potentially protecting itself from downturns in the electronics segment. Such a strategy not only helps in maximizing the overall revenue but also cushions the organization against market volatility.

The other options don't align with the definition of diversification. Focusing solely on one market relates to specialization rather than diversification, increasing the number of employees doesn't directly constitute diversification, and enhancing brand recognition, while critical, doesn't capture the essence of entering new markets or industries.