Factors influencing choice of unrelated diversification strategies in the Insurance Industry in Kenya

Abstract

The objective of the study was to determine the factors influencing choice of unrelated diversification strategies in the insurance industry in Kenya. The research design adopted by the study was a survey of insurance companies operating in Kenya. The study used primary data which were collected through self-administered structured questionnaires. The study used primary data which was collected through self-administered questionnaires. The structured questionnaires were used to collect data on the factors influencing the choice of unrelated diversification strategies in the insurance industry in Kenya. The data was analyzed and presented using mean, standard deviation and percentages. Results were presented in tables and charts. The findings of the study was that the reasons for companies pursuing unrelated diversification strategy was the promise for attractive financial gain, availability of resources which makes diversification economically feasible, in order to gain from superior skills of top management people, build shareholder value, profit erosion in maturing markets, in order for the company to reduce risks, in order to increase profitability by exploiting general organization competencies, highly fluctuating industry, in order for the company to learn and the business environment lacking the necessary institutions and factors to compete successfully. The study established that industry profitability, co-insurance effect, firm characteristics and general economic environment influence the insurance companies to pursue unrelated diversification strategies.