A strategy is a specific plan prepared for meeting the challenge of competitors and environmental forces. In such a case, strategic planning is a process that equips the organization to sail through the turbulent market to meet its objectives, outperforming the competitors. According to the product-market matrix, whenever an organization thinks of applying a strategy, it has four alternatives in position: Market penetration( grow in the current market with the same product), new product development(a new product for the current market), market development (same product in a new market) and finally diversification( new product and new markets). This diversification could be concentric, in the same or related industry or conglomerate, in a different industry. It can also be either vertical or horizontal,i.e, vertical diversification will give the firm a better hold on the same industry whereas horizontal diversification will give economies of scale by doing different businesses of the same level.

As mentioned earlier, strategic alternatives that can be considered in place with diversification are market development, product development, and market penetration. Let us see different situations under which we can apply each of these strategies:

1. Market penetration- As mentioned this can be called as a strategy of "growing where you are". It means that the organization prefers to stay in the current market with current products and tries to explore the untapped areas of the market. They try to go deep into the market expanding their market share. This strategy can be applied when the organization is doubtful about introducing a new product or exploring new markets, maybe due to inadequate resources.
2. Newmarket development- As the name suggests, using this strategy the firm tries to explore new markets with the existing product, may be expanding its presence to other regions as well as the global market. This strategy can be chosen when the firm is quite sure about its marketing strategies and strong in it. They will have enough resources to take the current product to new markets to make the organization visible in new regions.
3. New product development- This is a strategy that is applied where the firm develops new products for its current market. This strategy can be applied when the firm has a good amount of loyal customers who will prefer to buy new products from their preferred firm. This strategy can also be applied when the firm has a strong research and development team that is continuously engaged in developing new products.

Diversification is a strategy adopted by firms that are very strong in both product and market side and also has a good amount of resources to allocate for this. Diversification is the best strategy that can be adopted by ambitious firms, but it is quite risky because any fault made might put the organization in a very difficult situation.