We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Is Industrial Diversification?

Malcolm Tatum
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Industrial diversification is a strategy that involves choosing to structure a company operation in a manner that promotes involvement in a wide range of revenue producing activities. An approach of this type may have to do with the production of goods and services associated with the business, or may focus more on how the company chooses to arrange its investment portfolio. The goal of any type of industrial diversification is increase the chances of returns by diversifying or spreading assets over a wider range of activities, while also helping to minimize the potential for failure or loss.

As it relates to production operations, industrial diversification has to do with providing goods and services that appeal to multiple markets rather than focusing on a product line that appeals to mainly one market. For example, a company may operate plant facilities that produce clothing items at one location, while also manufacturing bedding and other types of household textiles at another. At times, the diversification may involve completely unrelated products, such as a company that produces a line of office supplies but also has a division focused on the production of televisions and other electrical entertainment devices. The degree of industrial diversification will often be influenced by what owners believe will provide the best possible protection from declines in one market by enjoying corresponding increases in demand in another market.

Industrial diversification may also be employed when choosing assets for a corporate investment portfolio. In this scenario, the portfolio manager will seek to not only vary the type of holdings included in the investments, but also the range of variety within those sub-groups of holdings. This means that if the goal is to make sure the portfolio uses stock holdings to make up 50% of the total investments, he or she may allocate 10% to retail stocks, 20% to computer stocks, and another 20% to stocks associated with entertainment companies. The remaining assets in the portfolio may include several different kinds of bond issues, commercial real estate, and possibly even some commodities.

With either application, the idea behind industrial diversification is to increase the stability of the company by making it possible to enjoy revenue from more than one particular source. With a diversified line of products, the company stands a better chance of surviving if a slump in demand for its household appliances is offset by increased sales for its line of canned goods. In like manner, using industrial diversification to add variety to the corporate investment portfolio means that if stocks associated with a given industry undergo a slump, there’s a good chance that increases in the value of the other holdings will cover that loss and make it possible to still enjoy a net increase in returns.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
By SarahGen — On Jul 04, 2014

Anyone who invests in a sector should consider diversifying their investment across multiple sectors. Because if things are looking down in one sector and all of your money is invested in it, you will lose everything. But if you have investments in many sectors, you will survive economic crises that affect one or two investments.

By serenesurface — On Jul 04, 2014

@literally45-- That may happen, but I don't think it's a common issue.

Industrial diversification is a company's way of reducing risk. And I don't think that a company that has diversified produces goods of lower quality. Diversification doesn't say anything about the capability of a company to manufacture good products. It just means that they are expanding their business, developing expertise in a wide range of goods and are securing their place in the market.

By literally45 — On Jul 03, 2014

Doesn't industrial diversification have negative effects on sales because of consumer attitudes?

I mean, I don't think I would want to purchase electronics from the same company that produces marshmallows. It's an extreme example, but one gets the point. I think that too much diversification can cause consumers to lose trust in the company or the brand. Or consumers may doubt the quality of the products since they are so diverse and unrelated.

Does anyone agree with me?

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.