Abstract: The main purpose of the study was to investigate diversification strategies affecting the business performance of small and medium enterprises in Kenya. Small and medium enterprises particularly in developing countries tend to pursue product diversification strategies as a growth strategy in today’s dynamic environment. In Kenya, an average number of SMEs employ diversification strategies haphazardly without any strategic analysis which in turn negatively affect their business performance. Most SMEs practice "trial and error method" when implementing diversification as a growth strategy. This provides the need for SMEs to have the know-how in choosing the right diversification strategy to lower their risks and uncertainty and improve business performance. The challenge most SMEs in emerging countries face is deciding the most appropriate type of diversification strategy for their business once product diversification has been chosen as a growth path. The study sought to find out which is the efficient product diversification strategy for SMEs particularly in developing countries. The findings indicated that there is an inverted U shaped relationship between diversification strategies and SME performance. The study concluded that concentric diversification strategy is an attractive strategy for SMEs but not the best as it limits SMEs to certain sector, product or service; conglomerate diversification strategy is the efficient strategy for small and business enterprises because of their flexibility characteristic; interrelated diversification strategy least increases SMEs performance.
Keywords: Related diversification strategy, unrelated diversification strategy, interrelated diversification strategy, small and medium enterprises, product diversification strategy, developing countries, Kenya.
Title: DIVERSIFICATION STRATEGIES AFFECTING THE BUSINESS PERFORMANCE OF SMEs IN KENYA
Author: Joy Mutune, Dr. Frida Simba
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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