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In business, diversification refers to a company's involvement in multiple lines of business, or in multiple ways of distributing a product or service. This strategy is most commonly used in order to reduce risk or to increase revenues. Diversifying the products or services a company provides will lessen the impact of a downturn in the demand for one specific product or service. Companies sometimes discover that a product intended for one market can meet the needs of another market. For example, companies involved in the manufacture of certain products used by the military will often look for a means to sell the same product in the consumer marketplace.

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• SmallBusiness.com Glossary