Impact of Related Diversification Strategies on Organizational Performance among Star Rated Hotels in the Kenyan Coast
DOI:
https://doi.org/10.47672/jht.1704Keywords:
Related Diversification Strategies, Vertical Diversification, Horizontal Diversification, Organizational PerformanceAbstract
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.
Downloads
References
Al-Shakhsheer, F. J., Al-Ababneh, M. M., Habiballah, M. M. A., & Hsieh, M. T. (2022). The Influence of Related Product Diversification on the Competitiveness and Revenue Generation Potential of Individual Hotels: Empirical Evidence from the Jordanian Hotel Industry. Business Management Dynamics, (12).
Akewushola, R. (2015). Performance effectiveness and related product marketing diversification strategy in Nigerian companies: Information and communication technology as virile tool. Journal of policy and Development Studies, 9(2), 211-218.
Arsenieva, N. V., Putyatina, L. M., Barsova, T. N., & Golov, R. S. (2019). Modern problems of diversification of the activities of high-tech enterprises in the context of economic growth. Amazonia Investiga, 8(24), 353-362.
Arthur, A., & Thompson, J. (2004). Strategy: Wining in the Market Place, Core Concepts, analytical Tool and Cases.
Asman, R. M. (2013). Diversification Strategy and Performance of Kenyan Commercial State-owned Corporations (Doctoral dissertation, University of Nairobi).
Baloch, Q. B., Maher, S., Shah, S. N., Sheeraz, M., Iqbal, N., & Raza, H. (2022). Revitalization of tourism and hospitality sector: preempting pandemics through lessons learned. Environmental Science and Pollution Research, 29(55), 83099-83111.
Bama, H. K. N., Nyathela-Sunday, T., & Makuzva, W. (2022). What innovations would enable the tourism and hospitality industry in Africa to re-build?. Worldwide Hospitality and Tourism Themes, 14(6), 557-564.
Booyens, Irma. "13. Tourism's development impacts: an appraisal of workplace issues, labour and human development." Handbook of Tourism Impacts: Social and Environmental Perspectives (2022): 197.
Cherryholmes, C. H. (1992). Notes on pragmatism and scientific realism. Educational researcher, 21(6), 13-17.
Espino-RodrÃguez, T. F., & Gil-Padilla, A. M. (2015). The structural and infrastructural decisions of operations management in the hotel sector and their impact on organizational performance. Tourism and Hospitality Research, 15(1), 3-18.
Eukeria, Mashiri, and Sebele Favourate. "Diversification as a corporate strategy and its effect on firm performance: A study of Zimbabwean listed conglomerates in the food and beverages sector." International Journal of economics and Finance 6.5 (2014): 182-195.
Evans, N., Stonehouse, G., & Campbell, D. (2012). Strategy and strategic objectives for travel and tourism organizations. In Strategic Management for Travel and Tourism (pp. 15-34). Routledge.
Gore, S., Borde, N., & Hegde Desai, P. (2021). Assessment of technology strategies for sustainable tourism planning. Foresight, 23(2), 172-187.
Goryushkina, N., Voinova, N., Voronkova, O., Sitnov, A., Shichiyakh, R., & Gordeyeva, O. (2019). Theoretical aspects of entrepreneurial education for hospitality industry. Journal of Environmental Management & Tourism, 10(4 (36)), 835-841.
Grant, M., & Startz, M. (2022). Cutting out the middleman: The structure of chains of intermediation (No. w30109). National Bureau of Economic Research.
Gyan, A. K., Brahmana, R., & Bakri, A. K. (2017). Diversification strategy, efficiency, and firm performance: Insight from emerging market. Research in International Business and Finance, 42, 1103-1114.
Hamilton, J. L., & Mqasqas, I. M. (1997). Direct vertical integration strategies. Southern Economic Journal, 220-234.
Hasby, H., Buyung, S., & Hasbudin, S. (2017). The effect of organization size and diversification on capital structure and organization value (study in manufacturing sector in Indonesia Stock Exchange). The International Journal of Engineering and Science, 6(6), 50-61.
Heckmann, N., Steger, T., & Dowling, M. (2016). Organizational capacity for change, change experience, and change project performance. Journal of business research, 69(2), 777-784.
Government of Kenya (2022). Kenya National Bureau of Statistics. Economic Survey. Nairobi, Kenya.
Government of Kenya (2019). Kenya National Bureau of Statistics. Economic Survey. Nairobi, Kenya.
Government of Kenya (2017). Kenya National Bureau of Statistics. Economic Survey. Nairobi, Kenya.
Kalnins, A. (2016). Beyond Manhattan: Localized competition and organizational failure in urban hotel markets throughout the United States, 2000-2014. Strategic Management Journal, 37(11), 2235-2253.
Kano, L., Narula, R., & Surdu, I. (2022). Global value chain resilience: Understanding the impact of managerial governance adaptations. California Management Review, 64(2), 24-45.
Klein, P. G., & Lien, L. B. (2009). Diversification, industry structure, and firm strategy: An organizational economics perspective. In Economic Institutions of Strategy (Vol. 26, pp. 289-312). Emerald Group Publishing Limited.
Maragia, I. N., & Kemboi, A. (2021). Effect of diversification strategy on organizational performance of manufacturing companies in Uasin Gishu County. International Journal of Economics, Commerce and Management United Kingdom, IX, 4, 43-56.
Marco-Lajara, B., Ruiz-Fernández, L., Seva-Larrosa, P., & Sánchez-GarcÃa, E. (2022). Hotel strategies in times of COVID-19: a dynamic capabilities approach. Anatolia, 33(4), 525-536.
Matarazzo, M., Penco, L., Profumo, G., & Quaglia, R. (2021). Digital transformation and customer value creation in Made in Italy SMEs: A dynamic capabilities perspective. Journal of Business Research, 123, 642-656.
Mendoza-Abarca, K. I., & Gras, D. (2019). The performance effects of pursuing a diversification strategy by newly founded nonprofit organizations. Journal of Management, 45(3), 984-1008.
Misigo, I. R. (2018). Influence of strategic capabilities on competitive advantage of sugar companies in Western Kenya (Doctoral dissertation, COHRED-JKUAT).
Moutinho, L. (2000). Segmentation, targeting, positioning and strategic marketing. Strategic management in tourism, 121-166.
Ministry of Tourism & Wildlife. (2019). Tourism Sector Performance Report 2019. Nairobi: Tourism Research Institute.
Ministry of Tourism & Wildlife. (2022). Tourism Sector Performance Report 2022. Nairobi: Tourism Research Institute.
Mugenda, O. M., & Mugenda, A. G. (2012). Research methods: Quantitative & qualitative apporaches (Vol. 2, No. 2). Nairobi: Acts press.
Ojiru, J. (2023). Adopting strategic diversification measures and organizational performance in manufacturing concerns: an empirical overview. Journal of Global Economics and Business, 4(13), 111-137.
Oyedijo, A. (2012). Effects of product-market diversification strategy on corporate financial performance and growth: An empirical study of some companies in Nigeria. American International Journal of Contemporary Research, 2(3), 199-210.
Oyefesobi, O. O., Akintunde, S. O., & Aminu, S. A. (2017). Diversification strategy and organization market share in the Nigerian manufacturing industry. Ilorin Journal of Management Science, 4(1), 19-31.
Pearce II, J. A., & Robbins, D. K. (2008). Strategic transformation as the essential last step in the process of business turnaround. Business Horizons, 51(2), 121-130.
Pierce, J. R., & Aguinis, H. (2013). The too-much-of-a-good-thing effect in management. Journal of Management, 39(2), 313-338.
Randeree, K., & Youha, H. A. (2009). Strategic management of performance: an examination of public sector organizations in the United Arab Emirates. International Journal of Knowledge, Culture and Change Management, 9(4), 123-134.
Restuputri, D. P., Septira, A. P., & Masudin, I. (2023). The Role of Creative Leadership to Improve Organizational Performance through Organizational Ambidexterity in Creative-Based SMEs. IEEE Transactions on Engineering Management.
Richard, P. J., Devinney, T. M., Yip, G. S., & Johnson, G. (2015). Measuring organizational performance: Towards methodological best practice. Journal of management, 35(3), 718-804.
Rizea, R. D. (2015). Growth Strategies of Multinational Companies. Economic Insights-Trends & Challenges, 67(1).
Santos, J. B., & Brito, L. A. L. (2012). Toward a subjective measurement model for firm performance. BAR-Brazilian Administration Review, 9, 95-117.
Schommer, M., Richter, A., & Karna, A. (2019). Does the diversification-firm performance relationship change over time? A meta"analytical review. Journal of Management Studies, 56(1), 270-298.
Sheel, A. (2017). Hotel industry performance in 2016-2017 and the JHFM index. The Journal of Hospitality Financial Management, 25(2), 75-76.
Siedlecki, S. L. (2020). Understanding descriptive research designs and methods. Clinical Nurse Specialist, 34(1), 8-12.
Teo, P. (2002). Striking a balance for sustainable tourism: Implications of the discourse on globalisation. Journal of Sustainable Tourism, 10(6), 459-474.
Triaa, W., Gzara, L., & Verjus, H. (2016, August). Organizational agility key factors for dynamic business process management. In 2016 IEEE 18th Conference on Business Informatics (CBI) (Vol. 1, pp. 64-73). IEEE.
Wairimu, W. W. (2015). Micro, small and medium-size enterprises (MSMEs) as suppliers to the extractive industry. United Nations Development Programme Report.
Wanjala, K. (2020). The Economic impact assessment of the novel coronavirus on tourism and Trade in Kenya: lessons from preceding epidemics. Finance & Economics Review, 2(1), 1-10.
Wezel, A., Herren, B. G., Kerr, R. B., Barrios, E., Gonçalves, A. L. R., & Sinclair, F. (2020). Agro-ecological principles, elements, and their implications for transitioning to sustainable food systems. A review. Agronomy for Sustainable Development, 40, 1-13.
Zheng, C., & Tsai, H. (2019). The moderating effect of board size on the relationship between diversification and tourism firm performance. Tourism Economics, 25(7), 1084-1104.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 Jacob Owenga, Rayviscic Mutinda, Isabella Mapelu
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
