Global Advanced Research Journal of Management and Business Studies (GARJMBS) ISSN: 2315-5086 March 2012 Vol. 1(2), pp 061-069

Copyright © 2012 Global Advanced Research Journals   


Original Research Articles

Effects of product market diversification strategy on corporate financial performance and growth an empirical study of some companies in Nigeria 

Ade Oyedijo 

Department of Business Administration and Management Technology, Lagos State University, Ojo, Lagos, Nigeria.


Accepted 05 March, 2012; Received  16 February 2012



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 diversification strategies. It was proposed that firms that pursue related diversification strategy outperform and grow faster than those that attempt to pursue unrelated diversification strategy. It was further proposed that firms that pursue related diversification strategy exclusively will perform better than firms that pursue a mixed (i.e. related and unrelated) diversification strategy. Using the Panel Regression analytical technique involving correlation, F-statistics and descriptive statistics, the result of the Fixed Effect test showed that there is a high and positive correlation between financial performance and growth of firms and related diversification strategy. Related diversifiers had a relatively higher level of financial performance and growth than unrelated and mixed diversifiers. A marginal correlation was found between unrelated and mixed modes of diversification and financial performance and growth. The panel regression analysis showed that related diversification has a significant impact on performance (p< 0.05) while unrelated diversification has a negative but non-significant impact on performance and growth. The result of the F-statistics showed that there were significant performance and growth differences between firms utilizing related diversification strategies and those utilizing unrelated diversification strategies (F = 147.4405, p <0.05). The panel model result further confirmed that there is a significant difference between the performanceand growth of firms using mixed (related and unrelated) diversification strategies and the performance and growth of firms pursuing related diversification strategy exclusively. A significant difference was also found between the performance and growth of firms that develop through unrelated diversification and the performance and growth of firms that remained specialized, with firms that remained specialized performing better on all parameters and growing faster than those that develop through unrelated diversification only. The study concludes that the financial performance and 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 either a related product-market diversification strategy or a specialization strategy. 

Keywords: Diversification, Strategy, Performance, Product-Market

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