Effects of Product – Market Diversification Strategy on Corporate Financial Performance and Growth: An Empirical Study of Some Companies in Nigeria.
Ade Oyedijo

Abstract
This study takes diversification research to a new level of analysis by examining the performance of a sample of Nigerian companies in relation to specialization, related, unrelated and mixed product-market strategies. It was proposed that firms that pursue related or unrelated diversification strategies outperform and grow faster than those that attempt to pursue both. Using the triangulation analytical technique involving correlation, multiple regression, ANOVA, independent sample test and Scheffe Ad Hoc test, it was found that there is a high and positive correlation between financial performance and related diversification strategy. Related diversifiers had a relatively higher level of financial performance than unrelated and mixed diversifiers. A marginal correlation was found between unrelated and mixed modes of diversification and financial performance and sales growth. The regression analysis showed that related diversification has a significant impact on performance (t = 3.380; p< 0.05) while unrelated diversification has a negative but non-significant impact on performance and growth. The result of the analysis of variance (ANOVA) showed that there were significant performance differences between firms utilizing only related diversification strategies and those utilizing only unrelated diversification strategies (F = 3.110, p <0.05). The Scheffe’s Test further confirmed that there is a significant difference between the performance of firms using mixed (related and unrelated) diversification strategies and the performance of firms pursuing either of the two strategies exclusively with firms pursuing either of the two strategies exclusively outperforming the firms that are pursuing mixed (related and unrelated) diversification strategies. A significant difference was also found between the performance of firms that develop through related or unrelated diversification and the performance of firms that remained specialized, with firms that remained specialized performing better on all parameters and growing faster in sales than those that develop through related and unrelated diversification only. The study concludes that the financial performance and sales growth of firms in Nigeria are significantly affected by the mode of diversification used and recommends that Nigerian firms that are seeking a sustainable fast growth and superior performance should pursue a related product-market diversification strategy or a specialization strategy but not both.

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