ABSTRACT
This chapter considers more conservative strategies which fall short of diversification such as: market penetration, market development and product development. Competition between rival manufacturers usually takes the form of product development backed by persuasive advertising but, as W. J. Baumol emphasises, seldom through the medium of price. The diversification of the product line is seen by R. L. Marris as the prime means by which growth in demand is sustained. In fact diversification may involve changes in the relationship between the firm and its markets as well as changes involving the product line itself. The organisational structure adopted in the diversified firm, if accomplished by merger, is strongly influenced by the merger process itself. If the company can diversify into a product-market situation in which both production and marketing skills can be employed, economies and synergy can be exploited to the maximum permitted by horizontal diversification.
