We rely on a new firm level dataset containing detailed information about the structure of production of a large sample of French manufacturing firms to investigate whether the observed aggregate reallocations of production are (at least partly) driven by within - firm product portfolio strategies. Using instrumental variable strategies, we obtain that firms experiencing a high low-cost country competitive pressure are significantly more diversified in their productions, whereas firms exposed to northern competition rather choose to re-focus their product portfolios. Further analysis shows that more productive firms combine more often these productive reallocations with genuine innovative activities, which may explain why they achieve higher survival rates, and that the correlation between diversification and southern competition is non-linear, thus suggesting that the underlying diversification strategy might be transitory.