The Relationship between Diversification Strategy and Organizational Performance: A Research Intented for Comparing Belgium and Turkey

Ekpe

Problems and Perspectives in Management

2019

Critical to the sustainability and continuous success of every organization is the performance concept. Hence, the cardinal goal of every organization is to achieve sustainable progressive performance for their organization. Several factors have been found to contribute to the performance of an organization. While empirical evidence indicated that innovativeness is one of the major determinants of organizational performance, many fast moving consumer goods (FMCG) were slow in their demonstration of innovative capability and it has been noted that the performance of these companies has not been impressive possibly due to the slow pace of innovativeness in the industry. This study thus investigated the effect of innovative strategies on the growth of selected FMCG firms in Lagos state, Nigeria. Survey research design was adopted for the study. The population comprised 1,337 top and middle level management staff of four notable players in the FMCG industry in the state (Honeywell flower mills Plc, Dangote flower mills, Unilever Nigeria Plc, and Cadbury Nigeria Plc). Through proportionate stratified random sampling technique, 400 out of 1,337 were sampled for the study. Four hundred copies of a validated questionnaire with Cronbach’s alpha reliability coefficient ranging from 0.731 to 0.956 were administered to the sample with a response rate of 84.25%. Data were analyzed using both descriptive, as well as inferential statistics. Finding revealed that innovative strategies had a significant effect on growth of FMCG firms in Lagos state, Nigeria (R2 = 0.724, β = 0.887, t = 29.663, P ≤ 0.05). The study recommends that FMCG firms management need to initiate policies that will enhance innovativeness possibly through creation and proper funding of the research and development department to effectively drive growth of FMCG firms.

mentioning

confidence: 79%

Innovative strategies and firm growth: evidence from selected fast moving consumer goods firms in Lagos state, Nigeria

Ekpe

Problems and Perspectives in Management

2019

“…Corporate diversification is beneficial for the organizations when it is defined within the scope of firm's current resources and capabilities (Chi, 1994). Due to overcapacity problems; however, diversification strategy may also cause greater marginal cost of production beyond a certain point (Anil & Yigit, 2011;Boz et al, 2013). Moreover, corporate diversification also causes additional management costs (Jones & Hill, 1988).…”

Section: The Review Of Literaturementioning

confidence: 99%

“…Rumelt (1982) also confirmed that the related corporate diversification was better for company performance while unrelated diversification was not. Moreover, unrelated diversification was found to be more profitable than related diversification because unrelated diversifiers outperformed related diversifiers due to spread of business risk portfolios (Boz et al, 2013;Cariola et al, 2010).…”

Section: The Review Of Literaturementioning

confidence: 99%

“…Such kind of definition does not differentiate between the business-related and the business-unrelated products. Boz, Yigit, and Anil (2013) referred to it as a tactic of increasing the number of businesses to increase development and growth and reduce the company's overall business risk. It may be experienced by different approaches including internal developments, joint ventures, mergers, and acquisitions as well as licensing agreements.…”

mentioning

confidence: 99%

“…These mixed results show that diversification involves trade-off between costs and the resulting benefits and there may exist U-shaped relationship between corporate diversification and firm performance (Kang et al, 2011;Mathur, Singh, & Gleason, 2001;Singh et al, 2010;Tallman & Li, 1996). Their findings implied that diversification provided economies of scales and scopes up to a specific limit and then performance declined when marginal cost exceeded its marginal benefits of diversification due to internal inefficiency levels and agency problems (Aleson & Escuer, 2002;Anil & Yigit, 2011;Boz, Yigit, & Anil, 2013;Kang et al, 2011;Nayyar, 1992;Qian, 2002;Singh et al, 2010;Tallman & Li, 1996). The relationship between corporate diversification and firm performance has been explored in the context of developed countries and there are a few studies that have studied the implications of diversification strategy in developing countries like Pakistan.…”

mentioning

confidence: 99%

See 2 more Smart Citations

Corporate diversification and firm performance: An inverted U-shaped hypothesis

Ali¹,

Hashmi²,

Mehmood³

2016

IJOL

This study aimed to investigate the relationship between corporate diversification and firm performance in a developing country. Previous studies have found that the mixed results have been established between these two constructs in developed countries such as linear, u-shaped or inverted u-shaped relationship. To this end, a sample of 141 non-financial companies over the period of 2003 to 2013 listed on Pakistani stock market was used to analyze the impact of diversification strategy on the performance of firm. Corporate diversification is divided into two types including product and geographic diversification. The findings of the study demonstrated that an inverted u-shaped relationship existed as performance increased up to a certain level due to the related diversification strategy and then it fell down drastically. It showed that too much diversification creates agency problems and internal inefficiencies. It has implications for agency problems, weak corporate governance structures, and family relationships.

Narrow diversification, wide diversification, and audit quality, evidence from China

Hao

Liu

2018

ARA

Purpose Audit firm diversification can take many forms. Strategic management theory suggests that if the diversification has a narrow focus, it can have a positive effect on performance through knowledge spillover. However, if the diversification is too wide, the lack of economies of scope may cause an even negative impact on performance. The purpose of this paper is to examine the effect of an audit firm’s diversification strategy on audit quality. Design/methodology/approach Specifically, the authors test whether auditors can benefit from knowledge spillover in their area of specialization. Findings The authors find that the magnitude of discretionary accruals and the balance of below-the-line item are significant lower for clients from narrowly diversified area than those from a widely diversified area, suggesting a higher audit quality due to possible knowledge spillover. In addition, the authors find such benefits are more pronounced with clients with high earnings volatility. Originality/value This study extends the studies on auditor industry specialization by examining the effect of audit firms’ diversification on audit quality and assessing potential differences on audit quality between narrow and wide diversification.