What is a diversification strategy? How can a firm reduce the risks associated with diversification?

Diversification involves taking a new product to a new market,and it is the strategy with the highest risk.The risk of diversification can be reduced when a company plans its growth across time.Before entering a new market with a new product,a company can develop a new product for the existing market,which it already knows,and in which it has brand image and access to distribution channels.In the next step,it can take the product that has been successfully introduced in the existing market to a new market.Alternatively,it could introduce an existing product to a new market to gain market knowledge,create brand awareness and brand image,get access to distribution channels,and then develop a new product for this market.Thus,it does not go directly from penetration to diversification,but reduces the risk of diversification by making a detour via one or both of the other growth strategies.