Implementation of Diversification Strategy at Kibos Sugar & Allied Industries, Kisumu County, Kenya

Abstract

The Kenya Sugar industry is bedeviled with numerous challenges. This has led to some sugar firms seeking ways to sustain and grow their businesses. In this struggle, some firms have adopted diversification strategies. Diversification strategy takes the company into new businesses or industries that are related or unrelated to its core activities. This study focused on the implementation diversification strategy at KSAIL with main objectives being; to determine the implementation of diversification strategy, the challenges faced while pursuing diversification and the action taken to mitigate the challenges by KSAIL. Both primary and secondary data was collected from directors, senior managers and review of relevant company documents. A case study was used. Data was analyzed using content analysis and results presented in prose form. KSAIL has predominantly used internal growth to diversify, all new business units have been started from within the organization. KSAIL has adopted four diversification strategies, specifically: related product diversification, unrelated diversification vertical and horizontal integrations. Diversification has positively influenced KSAIL’s profitability. The company encountered different challenges during the implementation process; ineffectual management, skills gaps, resistance to change and conflict of interest, resource constraints, politics and Government bureaucracies. To mitigate these challenges, family members are actively involved in the management, skilled top managers are engaged, staff members are well trained and availed with relevant information and the firm has embraced robust CSR activities. The firm has adopted diversification strategies to grow market share, maximize profits, reduce costs, spread risks, and compete effectively in the Sugar industry. The study is anchored on; Modern Portfolio, Resource based view and Transaction Cost theories. The study concurs and contradicts some documented empirical literature. The research concludes that diversification is beneficial to KSAIL and recommends that companies should consider diversifying their product portfolios to remain competitive and profitable. Limitations encountered were the inability to access some records considered confidential, inadequate time and limited financial resources. The study is important to KSAIL and the Sugar industry at large, Government, scholars, and policy makers.