DECA Retail Merchandising Practice Exam

Which of the following is an example of related diversification?

1. Opening a grocery store in a new town

2. Launching a clothing line in department stores

3. Creating a new supermarket chain

4. Developing a fitness center within a retail space

The correct answer is: Developing a fitness center within a retail space

Related diversification refers to a strategy in which a company expands its operations into areas that are similar to its current business activities. This approach allows companies to leverage their existing capabilities, resources, and market knowledge while entering a new but related field. The correct answer illustrates this concept well because developing a fitness center within a retail space aligns with the existing retail environment and clientele. This move not only attracts customers who are already interested in health and wellness but also enhances the shopping experience by offering complementary services. This synergy can help the business to create added value, as fitness services can drive traffic to the retail space, potentially increasing overall sales. In contrast, the other choices involve expansion into areas that are less related. Opening a grocery store in a new town is simply geographic expansion rather than diversification into a related market. Launching a clothing line in department stores might leverage some existing retail skills, but it represents a shift into the fashion industry, which is quite different from grocery retail. Similarly, creating a new supermarket chain is a replication of the current business without entering a new market or service that complements it closely. Thus, these options do not encapsulate the strategy of related diversification as effectively as developing a fitness center within a retail space does.