Vertical Diversification

Vertical Diversification

In risk management, the act or strategy of adding very different investments to one's portfolio to hedge against the investments already in it. Ideally, this reduces the risk inherent in any one investment, and increases the possibility of making a profit, or at least avoiding a loss. Vertical diversification involves investing in very different securities; for example, one may choose to invest in securities traded in different countries, or in both winter clothing and swimsuit companies. Vertical diversification may be as broad or as narrow as the investor chooses. In general, broader diversification equates to less risk and lower return. See also: Markowitz Portfolio Theory, Horizontal diversification.
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The ministry's plan will expectedly help counter the mounting production costs and will consequently address the food shortage, depending on the horizontal and vertical diversification in agriculture.
Through vertical diversification in the form of backward business integration, Effortel expanded while simultaneously facilitating the development of the entire MVN industry, said Frost & Sullivan Programme Manager, Anesu Charamba.
They used vertical diversification to create linkages in the existing industries and horizontal diversification with an emphasis on exports and technological upgrade.
The IMF experts also suggested that successful strategies combine vertical diversification (in specific sectors) to create linkages in existing industries, and horizontal diversification (across sectors) beyond the comparative advantage, with an emphasis on exports and technology upgrading.
It is important to emphasise that it also has vertical diversification companies specialised in slaughter of chickens and bovine cattle; on the other hand it is the owner of malls such as El Jardin, Multiplaza and Citymall, amongst others.
Some of the driving forces behind these are the restructuring of oil majors, the globalization of National Oil Companies or NOCs, the transfer of ownership to private equity funds, new market participants, vertical diversification and retraction from niche markets.
Successful strategies have relied on a policy mix of promoting vertical diversification in "comparative advantage" sectors such as oil and gas and petrochemicals and endeavours into horizontal diversification beyond these sectors with an emphasis on technological upgrade and competition in international markets," it said.
Vertical diversification occurs when farmers engage them in different value added activities at farm level or adopt some other enterprises i.
Horizontal as well as vertical diversification seems to be the need of the hour.
On the other hand vertical diversification implies technological improvement in exports from primary to secondary or tertiary sector.
Economic theory generally links vertical diversification with intra-industry diversification while horizontal diversification is usually associated with inter-industry diversification.
The strong positive regression coefficients of horizontal and vertical diversification strategies further suggests that both horizontally and vertically related linkages perform better than an unrelated diversification strategy (a reference dummy category).