diversification

  

Definitions (3)

1. Banking: Spreading a bank's assets (loans) over a wider assortment of quality borrowers, to maintain or improve earning levels while maintaining the same level of exposure.
2. Corporate strategy: Practice under which a firm enters an industry or market different from its core business. Reasons for diversification include (1) reducing risk of relying on only one or few income sources, (2) avoiding cyclical or seasonal fluctuations by producing goods or services with different demand cycles, (3) achieving a higher growth rate, and (4) countering a competitor by invading the competitor's core industry or market. In contrast to vertical integration, diversification does not increase a firm's market or monopolistic power. Also called market diversification.
3. Investing: Spreading the available funds over a wider selection (portfolio) of types of investment, such as commodities, real estate, securities.

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