DIVERSIFICATION STRATEGIES AND FINANCIAL PERFORMANCE IN MOBILE TELECOMMUNICATION INDUSTRY, KENYA: A CASE OF SAFARICOM PUBLIC LIMITED COMPANY

Abstract: Over the past two decades firms have had a turbulent business environment owing to several factors that directly affect how they conduct their normal business. As such they have had to adopt different strategies to ensure that they survive in the long run. The specific objectives were to examine the effect of horizontal, concentric and conglomerate diversification strategies on financial performance in the mobile telecommunication industry. This research could be of importance to the management of the telecommunication companies, to future scholars and as reference material for further studies in this area. The study used four main theories namely, Resource based view theory, Ansoff theory, transaction cost theory and the agency theory. The research used descriptive design. In order to determine the sample population, proportionate stratified sampling method was employed. The total target population was 490 and a sample of 30% was drawn with the sample size being 147. Analysis for collected data was then done using descriptive statistics and presented using charts, graphs and tables. The relationship between the study variables was analyzed using simple regression analysis and correlation analysis. Validity was determined by use of well-structured questionnaires1with both open1and close ended questions. Reliability on the other hand was guaranteed by subjecting the questionnaire to a pretest in a pilot study. Data was collected using questionnaires and through a data sheet for secondary data. Collected information was analysed using inferential and descriptive data with the aid of1SPSS. Results were computed using standard deviation, means, percentages, tables and frequencies. The study revealed a significant strong positive correlation between concentric diversification and financial performance of the firm (r=0.665, p=0.00). Further, significant strong positive1correlation between financial performances of the firm and conglomerate diversification (r=0.732; p= 0.00) was established by the study. The study also found a significant positive1correlation between financial performance of the firm and internal diversification (r= 0.727, p= 0.000). Additionally, the study established a significant strong positive correlation between financial performances of the firm and horizontal diversification (r= 0.704; p= 0.000). Based on the aggregated means for each variable and the inferential statistics, conglomerate diversification was the most significant diversification strategy employed by Safaricom Public limited company. Thereby depicting Safaricom Public limited company as an innovative firm that keeps on adding new products and services to its existing products and services. Research recommends that Mobile Telecommunication companies’ managers must invest in diversification strategies to increase their income sources. This will ensure that the firm has a stable income in the event that one or two of its revenue streams are affected.

Keywords: mobile telecommunication industry, telecommunication companies, Safaricom Public limited company.