A Survey of Product Diversification Strategies Adopted by Nzoia Sugar Company Ltd

Abstract

Pursuing product diversification activities may enable a firm to exploit market opportunities and enjoy the benefits of economies of scale or scope. Product diversification may also achieve competitive advantage for companies through economies of scale and other synergies from using the company’s resources and capabilities across different product lines (Geringer et al., 2000). Such synergies from product diversification are more likely to be realized when firms expand into related lines of new products and markets (Qian, 1997; Luo, 2002). Therefore, Qian (2002) reported that product diversification is positively related to a firm's profitability. This study sought to determine product diversification strategies adopted by Nzoia Sugar Company and also to establish what managers of the company consider to be the relationship between product diversification and performance. This study used a case study analysis since the unit of analysis was one organization. Primary data was collected from the company management staff by use of interview guides. Interview guides were designed and administered through interview and discussions with key informants who include senior managers and departmental heads. The completed interview guides were edited for completeness and consistency before processing the responses. Being a case study, content analysis was most useful.From the findings, the study found that the product diversifications strategies adopted by Nzoia Sugar Company were moving from 50 kilogram unbranded sugar into packaged branded sugar in 5 kilogram 1 kilogram packet, 2 kilogram packet, ½ kilogram packet and 10 kilogram packet. The company by-product (molasses) is sold to other users for making industrial products like Spirits and other commercial alcoholic products and also develops cane seedlings that are sold to farmers. Product diversification increased the company’s sales, creates competitive advantage, it grows the business portfolio and profitability of the company and also improved company turnover. The study therefore recommends that Nzoia Sugar Company should fully embrace product diversification in order to improve the performance of the firm by increasing sales, creating a competitive advantage over the competitors and also to enhance customer loyalty to the products.