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Diversification Strategies

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Diversification Strategies
According to investopedia.com, “Diversification is a technique that reduces risk by allocating investments among various financial instruments, industries and other categories. It aims to maximize return by investing in different areas that would each react differently to the same event. Most investment professionals agree that, although it does not guarantee against loss, diversification is the most important component of reaching long-range financial goals while minimizing risk.”
Diversification strategies are used to increase a company’s operations by adding markets, products, services, or stages of production to the existing business. The purpose of diversification is to allow the company to enter lines of business that are diverse from current operations. There are three types of diversifications: concentric, horizontal and conglomerate. When the new venture is related to the existing lines of business, it is called concentric diversification. When a firm develops or acquires new products that are different from its core business or technology but appeals to their current customer that is called horizontal diversification. Conglomerate diversification is when there is no common thread of strategic fit or relationship between the new and old lines of business; the new and old lines of business; the new and old businesses are unrelated (Enotes.com).
Diversity at Southwest Airlines can be explained by the company having a modern and multi-faceted workforce which gives Southwest a competitive advantage in the national marketplace. Southwest employees represent a variety of backgrounds which possesses unique individual experiences to help Southwest’s corporate culture (Southwest.com). Southwest is able to foster an environment that encourages diversity, (ideas, knowledge and action that reaches out to various organizations and

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