What type of diversification involves developing or acquiring products that may appeal to current customers?

Horizontal diversification involves developing or acquiring products that are distinct from the current offerings but still appeal to the existing customer base. This strategy enables a company to leverage its brand and customer relationships by expanding its range of products or services to meet the needs of current customers. For example, a company that sells coffee might introduce a line of coffee-related accessories or snacks, thereby enhancing its product portfolio in a way that appeals to its existing consumers.

This approach is beneficial as it allows firms to capitalize on their existing market presence, improve customer loyalty, and reduce risks associated with entering entirely new markets. By staying within the realm of their expertise and target customer demographics, companies can effectively manage operational costs and marketing efforts, making horizontal diversification a strategic way to broaden a business's offering.

In contrast, concentric diversification entails developing products that are related but not necessarily cater to the same customer needs. Divestiture involves selling off portions of a business, while retrenchment focuses on scaling back operations to improve financial stability. These strategies do not inherently involve expanding the product range to attract current customers as horizontal diversification does.