Assessment Of Diversification As A Survival And Growth Strategy (A Case Study Of Nigerian Bottling Company Plc)

Project and Seminar Material for Economics

Assessment Of Diversification As A Survival And Growth Strategy (A Case Study Of Nigerian Bottling Company Plc)


The competitive nature of the economy, cause many products and services to lose their distinctiveness, the competitors’ offering of lower prices, and the deteriorating public perception of the business organizations have called for the strategies, and public relations in the marketing of consumer goods. The concept of Diversification strategy is that, the organization’s eggs are kept in different basket so that the risk of becoming bankruptcy will be reduced. This research examined the significant impact of Diversification to the Nigerian Bottling Company. The objectives of the study were to assess the success of Diversification strategy to the organization and to also assess those problems associated with Diversification strategy. The methodology included Survey Design to gather primary data from the 60 questionnaires for the study, Percentage used in presenting and analyzing the gathered data, and Chi-Square used in testing the null hypotheses. The major findings of the study were that; Diversification strategy has a significant impact on the survival and growth of the Nigerian Bottling Company.

Chapter One


1.1 Background of the Study

The world economy today is gradually integrating into one as a result of rapid technological growth especially in the areas of information and communication technology. This have broken down trade barriers across the nations and deepened competition. Moreover, economic crunch which in most cases affect the financial system led by the banking sector makes it imperative that banks should ensure that their investment portfolio mix is managed in such a strategic manner that non-banking operations can contribute meaningfully to the survival of the banks. One of the worst hit in any banking sector crisis is the micro finance sub-sector. Micro-finance bank which is critical to the economic growth of every nation must search for operational models that can help it survive in times of industry challenges. This requires that micro-finance banks must formulate strategies to create profit centers outside its conventional banking operations. Again, in order to enhance their competitive capacities, micro-finance banks must attract and sustain confidence from their various stakeholders or publics. This enunciates the need for diversification in micro-finance banks in Nigeria. In the view of Akanwa et al (2006), the formulation of a strategy for diversification must begin with an examination of the firm’s basic objectives, skills, and resources and an appraisal of its’ strategic design. They posits that the movement into diversification usually necessitates a change in the company’s root strategy and a complete recycling of the policy making process. In its meaning, Hao et al (2011) defined diversification strategy as a technique for the identification and assessment of potential risks and combine a diverse array of investments in a portfolio. They assert that the justification is that fluctuations in the value of single security will have smaller negative impact as a part of a diversified portfolio. In this way, diversification reduces the overall risk of the investments. To Hao et al (2011), there are three major strategies to enhance the quality of diversification. Firstly, the portfolio may comprise of various investment instruments such as bonds, cash, and stocks, among others. Secondly, one may employ various mutual fund strategies such as investment in balanced and index funds. This approach entails the creation of portfolio which comprises of instruments with varying levels of risk. Losses incurred by investments in some areas will be compensated by profits gained in other areas. Thirdly, one may diversify the industry type and geographic locations of the securities. This approach aims to lessen the impact of risks associated with the possible decline of particular industries. Moreover, weather conditions such as regional floods, storms, and floods may cause extensive damages on certain locally based industries. Furthermore, it is best to simultaneously invest in domestic and international securities. Even if one country is experiencing economic decline, the overall portfolio will include other countries of varying degrees of economic growth. In the view of Dastidar (2009), Diversification strategy comprises of horizontal and vertical diversification. The first type occurs when the investor holds securities in various companies which engage in a certain activity at the same stage of the production process. Vertical diversification refers to investment in companies which are engaged in different phases of production: from raw materials to finished products. In general, horizontal diversification narrows the investment to companies within a single sector. Vertical diversification increases the scope of investment to the purchases of stocks in different branches. Moreover, broader diversification may entail the purchase of both, stocks and bonds within diverse array of sectors. Levy and Sarnat (1970) say that organizations will attempt to diversify into a wide range of industries in order to lower their likelihood of failure. Weston and Mansighka (1971) indicated that firms may undertake corporate level diversification to defend against the possibility of a deteriorating industry environment. They suggest that organizations can survive, or at least affect their rate of decline if they react correctly to environmental change. Pfeffer and Salancik (1978) and Thompson (1961) state that firms can buffer against environmental effects through diversification of the firm’s activities or markets. The implication is that more diversified firms should be less inclined to fail.In the world of business, subsequent studies have shown that modern portfolio theory applies only in a limited way to individual firms. From the perspective of large enterprises, several studies have shown that those that are somewhat diversified in products and services, sectors, or geographical region are likely to outperform those with a narrow focus, as well as those that are highly diversified.2 Put differently, optimal diversification for large businesses—unlike optimal portfolio diversification—appears to entail finding a “sweet spot” in which a firm is neither overly concentrated, nor spread too thinly. Thus, a car manufacturer would usually be better served by making other types of vehicles than by diversifying more narrowly by simply offering a wider range of cars. Furthermore, diversifying across the transportation sector would normally be more beneficial than moving into a totally unrelated sector. What about small and mid-sized businesses, whose organizational constraints differ from those of large firms? For this type of business, diversification is arguably a more complex issue and one that has been researched less fully. For one thing, small businesses can have high risk exposure in ways that large firms do not. In some industries, for instance, small and mid-sized businesses often maintain significant exposure to a single major client. These industries, which include natural resources and aerospace, tend to be characterized by having just a few large firms at the top of the supply chain. High risk exposure can also arise from offering just one product or service line, even if a business has a broad customer base. Not all small and mid-sized firms are undiversified, however, and diversification is not merely a function of size or age. Our survey shows that some small businesses decide early on that diversification is important. Similarly, while highly diversified businesses are—as one might expect—larger, on average, than their undiversified counterparts, diversification is positively linked with financial performance regardless of firm size

1.2 Statement of the Problem

The diversification strategy, according to Palepu (1985), is an important component of the strategic management of a firm, and the relationship between a firm’s diversification strategy and its economic performance is an issue of considerable interest to managers and academics. The volatility of the construction market makes the strategic decision to diversify through knowing the correct combination of a company’s strength and business mix very important for a firm to survive and keep up with its competitors (Teo, 2002).It is in view of the above that the researcher intends to assess diversification as a survival and growth strategy.

1.3 Objective of the Study

The main objective of this study is on assessment of diversification as a survival and growth strategy; but to aid the completion of the study, the researcher intend to achieve the following specific objective;

  1. To assess the effectiveness of diversification as a growth strategy
  2. To examine the impact of product diversification in increasing sale volume
  3. To examine the relationship between product diversification strategy and survival strategy
  4. To examine the effect of diversification on product sustainability

1.4 Research Hypotheses

To aid the completion of the study, the following research hypotheses were formulated by the researcher;

  1. H0: there is no significant relationship between product diversification strategy and survival strategy
    H1: there is a significant relationship between product diversification strategy and survival strategy
  2. H0: product diversification does not have any impact in increasing sale volume
    H2: product diversification does have an impact in increasing sale volume

1.5 Significance of the Study

It is believe that at the completion of the study the findings will be of great importance to the management of Nigerian bottling company in formulating policies and adopting strategy that will give their product an edge over their rivals. The study will also be of great importance to the marketing department of Nigeria bottling company as the study seek to explore and assess product diversification as a survival strategy and organizational growth. The study will also be of great importance to researchers who seek to embark on a study in a similar topic as the study will serve as a reference point to further research;

1.6 Scope and Limitation of the Study

The scope of the study covers an assessment of diversification as a survival and growth strategy; but in the cause of the study, there are some factors that limit the scope of the study;

Time Constraint:

The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

Inadequate Materials:

Scarcity of material is also another hindrance. The researcher finds it difficult to long hands in several required material which could contribute immensely to the success of this research work.

Financial Constraint:

Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

1.7 Operational Definition of Terms


Diversification is a corporate strategy to enter into a new market or industry in which the business doesn’t currently operate, while also creating a new product for that new market. This is the most risky section of the Ansoff Matrix, as the business has no experience in the new market and does not know if the product is going to be successful


Economic development is the process by which a nation improves the economic, political, and social well-being of its people.

Growth Strategy

Strategy aimed at winning larger market share, even at the expense of short-term earnings. Four broad growth strategies are diversification, product development, market penetration, and market development

1.8 Organization of the Study

This research work is presented in five (5) chapters in accordance with the standard presentation of research work.

  1. Chapter one contains the introduction which include; background of the study, statement of the problem, aim and objectives of study, research questions, significance of study, scope of study and overview of the study.
  2. Chapter two deals with review of related literature.
  3. Chapter three dwelt on research methodology which include; brief description of the study area, research design, sources of data, population of the study, sample size and sampling technique, instrument of data collection, validity of instrument, reliability of instrument and method of data presentation and analysis.
  4. Chapter four consists of data presentation and analysis while
  5. Chapter five is the summary of findings, recommendations and conclusion.

Chapter Five

Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was on assessment of diversification as a survival and growth strategy.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of product diversification

5.2 Summary

This finding suggests a relationship between the level of diversification and performance. The implication is that a high degree of diversification does not seem to improve performance in terms of profitability. Nigerian construction firms are therefore advised to remain undiversified if their aim is to improve performance.

5.3 Conclusion

Conclusion of the study findings are advanced based on the relationships that were established for each of the different research objectives. It can be concluded that the commercial banks are mainly adopting related product diversification strategies which enables the commercial banks to achieve a high degree of compatibility with the existing business structures and platforms and thus leverage on operational synergy. From the study, the diversification strategies adopted by the commercial banks have been noted to have a positive relationship with performance.

5.4 Recommendations

The study established that 94.7% of the organizations are solely using related diversification however its highly recommended that there is need to incorporate unrelated diversification specifically to maximize on revenues. The Nigerian economy has experienced a boom in the real estate sector and given that the sector is majorly financed by the commercial banks there is need for banks to come up with full packaged offerings for their customers who seek to own homes.

Get Complete Project Material

5,000 5000

The Complete Material Will Be Sent to You in Just 2 Steps

Quick & Simple…

Step One Purchase

Make Payment (Through Transfer) of ₦5,000 to Any of the Account Below

Access Bank PlcAcc No: 0811003731
Samphina Academy
Current Account
Zenith BankAcc No: 1225513212
Samphina Academy
Current Account

Or CLICK HERE To Pay With Debit Card

CLICK HERE To Purchase Material ($15)
Make Payment of 120 GHS to 0553978005 | Douglas Cloud Osabutey | MTN MoMo

Step Two Purchase

Send the Following Details on WhatsApp ( 08143831497) After Payment

  1. Payment Details

  2. TOPIC: Assessment Of Diversification As A Survival And Growth Strategy (A Case Study Of Nigerian Bottling Company Plc)

The Complete Material Will Be Sent To You On WhatsApp After Receiving Your Details
T & C Apply

  Contact Our Help Desk

Need a Different Topic? Perform a Quick Search

List of Related Works

Click on Any Topic to Preview the Content

Samphina Academy

Samphina Academy is an Online Educational Resource Center that is aimed at providing students with quality information and materials to aid them in succeeding in their academic pursuit.