DECADECA Travel and Tourism Practice Exam

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What does a concentric diversification strategy involve?

Expanding into unrelated product lines
Seeking new products that have synergies with existing product lines
Diversifying geographically into new regions
Merging with competitors

The correct answer is: Seeking new products that have synergies with existing product lines

A concentric diversification strategy is focused on expanding a company’s product offerings in a way that complements its existing products. This means the new products are related in some way, allowing for synergies that can improve the overall strength of the company’s market position. For instance, a travel company that mainly offers hotel services might diversify into offering travel packages or guided tours, which can attract their existing customer base and leverage their market presence. By seeking new products that have synergies with existing product lines, a company can achieve several benefits such as streamlined operations, cross-promotion opportunities, and improved customer loyalty since the new offerings enhance the overall value proposition for customers. In this manner, concentric diversification is distinct from other strategies like unrelated diversification, which involves expanding into completely different industries without any connection to current products.