What type of diversification involves acquiring new products closely related to a company's core business?

Concentric diversification involves acquiring new products or services that are closely related to a company's existing core business. This strategy allows a company to leverage its existing capabilities, customer base, and brand reputation while expanding its product offerings. For instance, a company that manufactures electric appliances might introduce a new line of energy-efficient light bulbs. This approach can enhance the company’s overall market competitiveness and create synergies across the related products.

In contrast, horizontal diversification focuses on adding new products that are not necessarily related to the current offerings, aiming to appeal to different customer segments or increase market share. Conglomerate diversification, on the other hand, involves acquiring businesses in completely unrelated industries, which can reduce risk but does not strengthen the core business. Retrenchment is a strategy aimed at reducing a company's scale or scope, often through downsizing or divesting non-core assets, rather than expanding product lines. Therefore, the focus on related products makes concentric diversification the most appropriate answer in this context.