Implementation strategy and performance outcomes in related diversification

Significant changes in corporate or business strategy imply corresponding changes in capital needs, changes in management competence requirements, and changes in information processing structures. Therefore, such changes in strategy are always of interest to ownership, management, and corporate governance. In practice, the key step is to recognize what kind of changes in corporate and business strategy can take the firm into new territory and to adapt ownership, management, and corporate governance accordingly. As the case descriptions and the analysis in the following pages will show, significant changes in corporate or business strategy have the potential to undermine the long-run viability of the firm. Too often, the broader governance implications of changes in strategy are not recognized or are dealt with inadequately. Instead they should be seen as occasions for reviewing ownership, management, and making major adjustments to how the firm is set up.

Purpose: For any organization to succeed in the present competitive and ever-changing business environment, understanding the risks, opportunities, and strength posed by the external environment is inevitable. Organizations must exploit opportunities and avoid risks by applying relevant strategies and developing various strategic approaches that will improve their competitive edge and overall performance. One of the possible ways to improve business efficiency and performance is through diversification. The purpose of this study was to assess the applicability of a diversification strategy as a game plan to motivate and develop resilience against organizational and environmental forces in business operations to improve organizational performance in star rated hotels in the Coastal Kenya. The specific objectives was; to determine the impact of related diversification strategies on organizational performance among star rated hotels in coastal Kenya Coastal.
 Materials and Methods: Notably, 36 star rated hotels were selected while 419 respondents were involved which comprised; strategic managers, tactical and operational managers. This represented a response rate of 92.4% and 80.6% for the questionnaires and interviews respectively. Stratified sampling was used to select the hotels while purposive sampling was used to select the managers. Questionnaires and interview schedules were used during data collection. Data analyze was both analyzed using both descriptive and inferential analysis. The mean for overall adoption of horizontal diversification strategies was 3.94 (std. dev=0.92) while vertical diversification strategies was 3.28 (std. dev=1.13) which was significant. The mean on overall adoption of related diversification strategies was 3.60 (std. dev=0.95), demonstrating that related diversification strategies have on overall been adopted to a large extent.
 Findings: The model summary results indicates that R-Square=0.598; this implies that 59.8% of performance is explained by vertical and horizontal diversification strategies. This implies that, both horizontal and vertical diversification strategies were significantly adopted in the operation and management of hotel business in the coast region of Kenya. The null hypothesis stating, “There is no significant relationship between vertical diversification strategies and performance of star rated hotels along the Kenyan Coast” was rejected. This means that horizontal and vertical diversification strategies are significant predictors of performance of star rated hotels in the Kenyan Coast. From the regression model, horizontal and vertical diversification were found to have a positive effect that was statistically significant on performance of star rated hotels in the Kenyan Coast.
 Implications to Theory, Practice and Policy: Policy makers should initiate policies that motivate organizations such as hotels to practice diversification to minimize negative impact on both financial and non-financial performance aspects.

Nowadays, organizations must exploit opportunities and avoid risks by applying relevant strategies and developing various strategic approaches that will improve their competitive edge and overall performance. One of the possible ways to improve business efficiency and performance is through diversification in light of available government policies and regulations. The purpose of this study was to evaluate the moderating effect of government policies and regulations on diversification strategies and organizational performance amidst organizational and environmental forces within star rated hotels in the coast region of Kenya. The specific objectives were; to determine the moderating effects of government policies and regulations on the relationship between diversification strategies and organizational performance among star rated hotels in the Kenyan Coast. Notably, 36 star rated hotels were selected while 419 respondents were involved which comprised; strategic managers, tactical and operational managers. This represented a response rate of 92.4% and 80.6% for the questionnaires and interviews respectively. Stratified sampling was used to select the hotels while purposive sampling was used to select the managers. Questionnaires and interview schedules were used during data collection. Data analyze was both analyzed using both descriptive and inferential analysis. The model summary results indicate that R-Square value improves (from 0.598 to 0.617) when the moderating variable (Government policies and regulations) was added to the regression model. This means that government policies and regulations improve the relationship between related diversification strategies and performance of star rated hotels in the Kenyan Coast. The model summary results in Table 5 show that the value of R-Square improves from 0.558 without the moderating variable to 0.670 with the moderating variable. The moderating variable therefore improves the relationship between unrelated diversification strategies and performance of star rated hotels in the Kenyan Coast. The null hypothesis “Government policies and regulations do not have a significant moderating effect on the relationship diversification strategies with performance of star rated hotels in the Kenyan Coast” was rejected. In conclusion, government policies and regulations have a significant moderating effect on the effect of diversification strategies on performance of star rated hotels, annihilating the simple linear relations between predictor and outcome variables. The government should encourage diversification among hotel industry by providing favourable environment to conduct business through reduced tax and subsidies especially during economic turbulence.

An assessment of the diversification–performance linkage: An empirical comparison between Turkish and Italian firms

This study examines differences in profit and sales performance between the different Wrigley/Rumelt categories of diversification strategy. Our sample comprised 305 large U. K. manufacturing companies over the period 1972–84. Although diversification strategy explained only a small proportion of inter‐firm performance differences, once the influence of other firm and industry variables were taken into account, significant differences did emerge. Our findings conflict with those of earlier U.S. studies. In particular, we find that diversified firms outperformed specialized firms and there was no evidence that related diversification was more successful than unrelated.

Research summary: Prior theory suggests that the performance effects of a firm's diversification strategy depend on a firm's individual resources and capabilities and the setting within which it is operating. However, prior tests of this theory have examined the average diversification‐performance relationship across all firms, instead of estimating the diversification‐performance relationship at the individual firm level. Efforts to estimate this average relationship are inconsistent with a central assumption of much of strategic management theory—that firms maximize value by choosing strategies that exploit their heterogeneous resources and individual situation. By adopting an approach that allows an evaluation of the diversification‐performance relationship for individual firms, this article shows that firms, both focused and diversified, tend to choose that diversification strategy—focus, related diversification, or unrelated diversification—that maximizes value . Managerial summary: Instead of a universal diversification discount or premium, this article shows that the effect of diversification on performance is heterogeneously distributed across firms and that firms tend to be rational in their diversification decisions . Copyright © 2015 John Wiley & Sons, Ltd.

This article analyzes the impact of ownership structure on corporate diversification, with reference to large listed family business groups. By considering agency theory and socioemotional wealth, the study examines the relationship between family ownership, concentration of ownership, and degree and type of diversification. The study considers 99 Spanish listed business groups (50 family‐controlled‐ and 49 nonfamily‐controlled groups) and considers diversification of business group as the focus of analysis. The results show how family business groups present a lower preference for unrelated diversification than related diversification. There is also a nonlinear relationship between the concentration of ownership in family groups and the degree of diversification, showing different behaviors in family groups according to shares owned by the family's leading shareholders. This article contributes to the literature by providing a more precise identification of the corporate strategy adopted by business groups and establishing new evidence about the impact of family control on diversification strategies and the differences regarding nonfamily business groups.

Strategic flexibility, sourcing strategy and organisational performance are often a source of contention among firms in manufacturing sector. This paper explores the effects of specific types of strategic flexibility ? related and unrelated product diversification ? that matched with specific types of sourcing strategy ? make and buy. Questionnaires were sent to respondents who were top management officers of firms from four major manufacturing sectors: electrical and electronics, chemicals including petroleum, food and beverages, and fabricated metal. The results confirmed that a specific type of sourcing strategy (make or buy) mediated a specific type of strategic flexibility (related or unrelated product diversification). Specifically, the make strategy partially mediated the relationship between related product diversification strategy and organisational performance, whereas the buy strategy partially mediated the relationship between unrelated product diversification strategy and organisational performance. These findings go along with the theories that support both constructs: industrial organisation theory, transaction cost theory and resource-based view. All these findings would enable practitioners to make better manufacturing and sourcing decisions.

Several industrial organization studies, using diversification index measures, examined corporate diversification and economic performance and failed to find any significant relationship between them. Rumelt and other strategy researchers used a semisubjective classification scheme and uncovered a systematic relationship between diversification strategies and performance. This study combines the strengths of the index approach, namely, simplicity, objectivity and replicability, with the essential richness of Rumelt's methodology. Using the Jacquemin‐Berry entropy measure of diversification and the line‐of‐business data, this study finds that firms with predominantly related diversification show significantly better profit growth than firms with predominantly unrelated diversification.

ABSTRACTThe paper reports on a study of 28 ethnic Chinese businesses in Brisbane, Adelaide, and Perth, carried out in 2000 and 2001. It focuses on their strategies of vertical, horizontal, and unrelated diversification often combining different activities, products, and markets at the same time. It demonstrates how these practices are socially embedded in their preference for using personal networks.Non‐related diversification, in particular, promotes and is facilitated by using “weak ties” that serve as bridges, leading into new networks (Granovetter, 1973). This can create links to Chinese of different national and dialect origins and to those of other ethnicities. It is suggested that open networks and diversification mutually interact to support each other and may have evolved in tandem from earlier, more closed and niche bound business cultures and practices.

Diversification strategies and failure rates in the Texas lodging industry: Franchised versus company-operated hotels

The need for the adoption of diversification strategy became germane because of challenges which impede organizational performance. This study thus examined the effect of diversification on organizational performance of selected manufacturing industries so in south west Nigeria. Some studies of strategic study have investigated on the effect of diversification on organizational performance in manufacturing industries in Nigeria but have come up with inconclusive findings which create a gap that this study wants to fill. The specific objectives of the study are to examine the effect of related diversification on organizational performance and investigate the effect of unrelated diversification on organizational performance in manufacturing industry. Ex-post facto research design was used for the study. The population consists of employees of 22 manufacturing industries listed in Nigerian Exchange Group between 2011-2020 dealing in Food and Beverages, Breweries, Health care/Pharmaceutical and Conglomerates. The sample size comprises eight manufacturing industries with 750 employee’s selected using stratified sampling technique and selected according to 50% proportion of original sample size. Data were drawn from primary and secondary sources. Descriptive statistics was used to explain the respondent’s characteristics and inferential statistics was used to analyze data collected. Findings revealed that related diversification have significant effect on organizational performance F (4, 745) = 11.988, p < 0.01, R= 0.651, R2 = 0.424, and adjusted R2 = 0.419). Unrelated diversification however have significant but negative effect on organizational performance F (4, 745) = 11.982, p < 0.05, R = -0.466, R2 = 0.217, and adjusted R2 = 0.208). The study concluded that related diversification increase organizational performance while unrelated diversif

Based on the theory of principal-agent theory, this paper makes an empirical study on the process of influencing the performance of enterprises by using the analysis method of “power-decision-performance” analysis, using hierarchical regression and group regression analysis to analyze the diversification strategy of entrepreneurial enterprises analysis. The results show that the ownership concentration of entrepreneurial enterprises has a positive impact on the financial performance of entrepreneurial enterprises and has a negative impact on the market performance of entrepreneurial enterprises. The increase of ownership concentration will inhibit the diversified development tendency of entrepreneurial enterprises, and the related diversification strategy which has a positive effect on the financial performance and market performance of the enterprise. The related diversification strategy has some mediating effect in the process of the impact of ownership concentration on the performance of the firm, and the negative report of the media has a negative adjustment in this process.

The issue of revealing the essence of the concept of «diversification» in contemporary economic theory is relevant. This is associated not only to conceptual theoretical approaches, but also to the development of the global diversification process in the real sector of economy, including in the agro- industrial complex. The article examines the existing interpretations of this concept and identifies its distinctive features. Definitions are quite heterogeneous and it is difficult to form an unambiguous idea on their basis what is meant by diversification. This is due to the use of this term in various fields. Basedon the definitions of diversification examined in the article, the authors propose to consider diversity as its distinguishing feature, or rather its expansion, which can be expressed in an increase in the range of products, types of production, emergence of new fields of activity. As a feature of the research approach of various authors, the fact uniting their views on interpretation is that they consider diversification in the economy at various levels. The following types of diversification can be distinguished among the possible: structural and sectoral (depending on the level of the economic system); financial, production, trade, infrastructure, etc. (depending on the scope of application); internal and external (depending on the territorial/ local principle). The study of the theoretical foundations of diversification allows concluding that the conceptual foundations of diversification need to be refined. The heterogeneity of the structure of agricultural production and the economy in rural areas necessitates a comprehensive consideration of diversification in relation to the agricultural sphere and pointing out its system-forming elements.

The interplay between related and unrelated varieties and diversification processes as a driver of economic growth dominates contemporary discussions in the evolutionary economic geography (EEG) literature. This study provides further insights into these debates by exploring Poland, a nation of predominantly less developed regions, in the turbulent period between 1931 and 2000 which covers the Second World War and Communism. It is confirmed that in these specific settings only variety and diversification based on knowledge-intensive-related industries were conducive to growth. Successful diversification occurred more frequently around the capital city and transport corridors, indicating implications for EEG.