FACTORS INFLUENCING DIVERSIFICATION STRATEGIES AT HACO INDUSTRIES

Background of the Study

Porter (1980) offered three generic strategies of cost, differentiation and focus that may be used to gain competitive advantage. Companies may use any one or combination of these strategies to gain a competitive advantage. Authors have varying perceptions on diversification strategy with some (Pearce and Robinson, 2000) arguing it is important and others (Denis et al., 1997) saying it is not.

HACO Industries
HACO Industries was established in the early 1974 as single-product manufacturer. Beginning with stationery and shaver products, HACO diversified its operation into personal and home care products in the mid 1990s HACO Industries is now one of the regions leading fast moving consumer goods manufacturers, supplying a wide range of products to a vast market coverage including Kenya, Uganda, Tanzania, Ethiopia, Rwanda, Burundi, Djibouti and Eritrea

Statement of the Problem

HACO Industries in Kenya begun with stationery and shaver products. It diversified its operation into personal and home care products in the mid 1990s. The company has continued to diversify into other products by help of its strategic alliances with other business groups such as Societe Bic and Tiger Brands. In the emerging market context, the characteristics of this case poses certain interesting questions: why do businesses have to diversify? What are the factors influencing diversification strategies?

Statement of the Problem (Contd.)

Previous studies on diversification (Wakwoma, 2007; Munene, 2008; Lole (2009; Muchiri, 2009; Musila, 2009; Wefwafwa, 2009) have focused on adoption and application and not factors influencing diversification strategies This study seeks to bridge the knowledge gap by investigating the factors influencing diversification strategies

Objective of the Study

To determine factors influencing diversification strategies at HACO Industries

Value of the Study

HACO Industries: it will help the HACO management understand the importance of the factors that influence diversification to make their diversification strategies sustainable Stakeholders: This study will also give recommendations for improvement that will be beneficial to the players in the market Academicians: it will provide a base upon which secondary material on factors influencing diversification strategies can be accessed and used for further study

Literature Review
Thomas and Mason (2006) argued that the main purpose of diversification is to allow an organization to grow The management literature reviewed highlights two major different approaches to diversification: related and unrelated (Johnson et al. 2005) When diversification occurs through acquiring similar business options it is termed related (or concentric) diversification. This contrasts with unrelated (or conglomerated) diversification, which is the development of products or services beyond the organizations' current capabilities (Johnson et al. 2005)

Literature Review (Contd.)

The resource-based view suggest that firms diversify into related industries and related diversification leads to superior rents (Montgomery and Wernerfelt, 1988) According to the resource-based view, firms diversify in response to the excess capacity in the resources they possess (Penrose, 1959) According to Pearce and Robinson (2000), diversification represents a distinct departure from existing operations through acquisition or internal generation of separate businesses that are able to provide synergy with the original firm by counter-balancing strengths and weaknesses of the two businesses

Research Design
This study will be a case study. This method was chosen because only one organization is targeted. HACO Industries is believed to have important information that this study is seeking.

Data Collection
Primary data will be used in this study and will be obtained through an interview schedule. It will have open ended guiding questions but probing questions will be posed by the interviewer during the interviews. Interviews will be conducted at HACO Industries in order to gather information on diversification strategies. The interviewees will be three managers purposively selected for their knowledge on diversification strategies at HACO Industries. The three managers will comprise the heads of corporate planning, human resource & administration and operations department.

Data Analysis
A content analysis will be used to process data. This will involve scrutinizing data and categorizing it based on factors influencing diversification strategies at HACO Industries. Results will be presented using prose or narrative method.