Product Diversification Strategies Research Articles

Case Study of Production Diversification Strategy in an Industrial Company

The paper addresses diversification strategy as a possibility to solve the problem of reduced use of production capacity caused by external factors such as a decline in demand in the core business. On the basis of real case study of a Czech production company the paper presents the methodology for the development of the diversification strategy with the aim of successful penetration to industrial sectors. The whole process is divided in four phases. The first phase is focused on the identification and assessment the production and competitive competences of the company. The second phase deals with the evaluation of potential sector attractiveness and feasibility of entry in the analysed sector. The received results served as a basis for setting a complex evaluation matrix subsequently, which was used to target on the most promising sectors. A detailed survey was carried out, that focused on the selected sectors within the third phase providing a basis for key success factors identification and potential entry scenario projection. The last phase focuses on important aspects of economic efficiency estimation of the entry into the selected industrial sector.

Advantages of the Product Diversification Strategy in Beekeeping Farms

The purpose of the research is to shape the main benefits and motivations of Romanian beekeepers who manage a beekeeping farm and implement the diversification strategy. Interviews were performed with 20 managers of beekeeping farms from the North-West Region of Romania. Results point out that the main advantages of the production diversification strategy are the ability to respond to the opportunities that arise on the market, the involvement of farm owners and employees in different activities related to production throughout the year (they can live at the farm and work during the winter season), as well as professional satisfaction. The diversification strategy determines the competitive advantage of beekeeping farms and lies in the unique combination of different products specific to each farm, which differentiates it from its competitors.

Product Life Cycle of the Manufactured Home Industry

Residential construction consumes an estimated 26 percent of the total U.S. wood harvest and thus plays an important role in the forest products value chain. While being a relatively small part of the U.S. residential construction market, the factory-built residential housing industry, originating from manufactured homes (e.g. mobile homes), is embracing emerging industry segments such as modular or panelized homes. Since indications exist that factory-built home production is slated to gain a more prominent role in the U.S. construction markets at the cost of traditional stick-built production, the factory-built home industry sub-segment is of considerable importance to the forest products industry. This research looks at manufactured home producers as a benchmark for analyzing the current economic state of the industry and discusses competitive strategies. The analysis concludes, through macroeconomic modeling, that manufactured homes are in the declining stage of their product life cycle due to changes to the U.S. residential construction sector and the factory-built home industry and by advancements of rival industry-segments. As market share continues to decline, firms operating in this industry-segment seek to either hedge their losses through product diversification strategies or remain focused on strategically repositioning the manufactured home segment.

Economic trade-offs amongst production diversification strategies in Brazilian coffee cooperatives

Brazilian agricultural cooperatives have seen an unprecedented growth in production in the last decade which has led to several different product diversification strategies. Almost all studies in Brazil focus on the financial outcome of these strategies but few empirical studies have addressed them properly. Even fewer researches have dealt with the causes and possible strategies for the diversification of such cooperatives and their impact on their strategic planning. Hence, this paper aims at comprehending the different strategies in operations management for production diversification in coffee-producing cooperatives in south-eastern Brazil. This was done through a multi-case analysis comprising 6 coffee-producing cooperatives. The research analysed both verbal (through interviews) and non-verbal (multi-criteria decision analysis) responses to the causes of their diversification behaviours. It was possible to find out that most of the cooperatives’ rationale for diversifying is their pre-emptive response to financial crisis followed by increasing the number of associates as a strategy to overcome this economic struggle.

Subnational Institutional Environment and Product Diversification of Chinese Trust Companies

Does subnational institutional environment influence product diversification strategy of firms?While the diversity in subnational institutional development is observed in many emerging economies, its effect on firm strategic behavior and outcomes has not been sufficiently studied.Utilizing the context of the emergence of Chinese trust industry in imbalanced domestic institutional environment, we test the influence of subnational institutional environment on trust companies' strategy formulation (product diversification) and implementation outcome (firm performance). Based on data of all trust companies in the industry during 2007 to 2010, we find substantial support to our hypotheses. Findings show that the level of government interference negatively moderates the relationship between human capital and product diversification and the relationship between product diversification and firm performance; the level of intermediary development has the opposite effects on the two relationships. These results highlight a subnational institutional perspective on firm strategy formulation and implementation in an emerging economy context.

Specific match between specific types of strategic flexibility and sourcing strategy: another strategic approach to build competitive advantage

Strategic flexibility, sourcing strategy and organisational performance are often a source of contention among firms in manufacturing sectors. This paper explores effects of specific types of strategic flexibility and product diversifications (related and unrelated) on strategic sourcing of make and buy. Questionnaires were sent to top management personnel of firms in four manufacturing sectors namely electrical and electronics, chemicals (including petroleum), food and beverages and fabricated metal. The results confirmed that the make or buy sourcing strategy acts as mediators and it partially does so on the relationship between related product diversification strategy and organisational performance. In addition, the buy strategy mediated partially the relationship between unrelated product diversification strategy and organisational performance. These findings go along with the theories that support both constructs, Industrial Organisation (IO) Theory, Transaction Cost Theory and Resource–Based View (RBV). All these findings should enable practitioners to make better manufacturing and sourcing decisions.

Product Diversification, Corporate Entrepreneurship, and Firm Performance: The Case of Vietnamese Firms

This paper reexamines the relationship between the firm’s product diversification strategy and its performance. I propose a theoretical framework to indicate that the effect of diversification, as an act of corporate entrepreneurship, depends on whether responsiveness or synergy is emphasized. Empirical evidences from the provincial firm-level database in Vietnam show that diversification has positive and non-linear decreasing impact on firm-level profitability. The estimation results are consistent with different methodological treatments adopted: diversification index measured exogenously or endogenously in static model or dynamic model.

Leverage, product diversity and performance of general insurers in Malaysia

PurposeThe purpose of this paper is to examine the effect of leverage on the financial performance of general insurance companies in Malaysia, and investigate whether the leverage‐performance relationship is a function of or contingent on the extent of product diversification.Design/methodology/approachThe sample consisted of the entire population of authorized general insurance companies operating during the period from 2006 to 2009 in Malaysia. A total of 94 observations were analysed. All the data used were sourced from the Malaysian Central Bank's (BNM) database.FindingsIt is found that leverage is negatively associated with firm performance. However, there is a significant interaction effect between leverage and product diversity on firm performance. The finding indicates that leverage could be beneficial or detrimental to the financial performance of general insurance firms, contingent on the extent of product diversity of the firm.Research limitations/implicationsAs the scope of study is limited to the general insurance industry and the sample size is small, the findings of the study must be interpreted with caution and the results may not be generalizable to the life insurance sector or other industry.Originality/valueFindings of prior empirical studies on leverage‐performance relationship and effect of insurance product diversification are rather mixed and inconclusive. Based on analysis of a single insurance (general) sector that is highly regulated, the paper provides empirical evidence that the benefits of product diversification strategy are contingent on level of the firm's leverage. The paper hence, enhances understanding and contributes to the existing literature on impact of leverage, product diversification on performance of the highly regulated general insurance firms in a developing country.

Geographical and Product Diversification During Instability Financial Period: Good or Bad for Banks?

This paper analyses the effects of the geographical and product diversification strategy on the performance of Italian banks in markets characterized by considerable instability. The econometric analysis, developed in the cross-section and time series dimension, considers a panel data set comprising 4,038 observations relative to Italian banks in the period 2005-2010. The study measures the degree of product diversification in banks through the Herfindahl-Hirschman Index (HHI) calculated on the product lines present in the commercial portfolio offered by banks on the market, while it measures the degree of geographical diversification through the HHI built on the distribution of bank branches in 108 Italian provinces. The results confirm a positive relationship between product diversification and bank performance in terms of Return on Assets (ROA) and Return on Equity (ROE). Identical results are obtained with respect to the geographical diversification. Ascertainments made having recourse to Risk-Adjusted Performance indicators point to similar results. All this points to useful implications for bank supervisors and managers, particularly in current market conditions.

薬用人参の産地マーケティングの実態と課題

This study examines Nagano Prefecture (Ueda area) as a major ginseng production center and reveals the conditions and issues associated with ginseng marketing.Nagano Prefecture has been increasing its sales of red ginseng in domestic markets through its basic strategy of emphasizing the production and processing of red ginseng cultivated in 5 to 6 years, led primarily by JA. Through these efforts, primary-processed products were sold using the channel strategy of focusing on herbal medicine stores that allow in-store demonstrations. Secondary-processed products were sold using product diversification and channel strategies targeting the commercial-use market.However, future marketing activities for all medicinal products using the strengths of the general agricultural cooperative will also be necessary.

Collectivistic-HRM, firm strategy and firm performance: an empirical test

This study tests the effect of collectivism-oriented HRM (C-HRM) and that of firm strategy on firm performance among samples of international firms. Based on the relevant literature, we predict that C-HRM should have a positive effect on firm performance. Moreover, we argue that a contingent factor, i.e. firm strategy of product diversification, should have a direct negative effect on firm performance. Moreover, this firm strategy should also moderate the relationship between C-HRM and firm performance. Analyzing empirical data from multiple sources to test relevant hypotheses in a major emerging economy, i.e. P.R. China, we found evidence supporting our hypotheses. The paper concludes with a discussion of the implications of the findings.

International new ventures in “low tech” sectors: a dynamic capabilities perspective

PurposeDrawing on the dynamic capabilities perspective and the resource‐based view (RBV) of the firm, this paper seeks to further understanding of international new ventures (INVs) operating in a traditional low technology sector – an understudied context in international entrepreneurship.Design/methodology/approachExploratory research merited qualitative research as the chosen methodology. Multiple case study design and critical incident technique were the main qualitative techniques employed.FindingsThe case entrepreneurs' objective and subjective capabilities emerge as a critical key resource for strategically managing and developing the dynamic capabilities of the firm in areas of research and development (R&D), logistics and production. The firms' capability to adapt and renew themselves through product diversification strategies was also critical for sustainable competitive advantage in a highly turbulent and competitive sector of seafood.Research limitations/implicationsThe study is sector‐specific and, while the sample size is small, findings are consistent. The paper presents a conceptual research framework for exploring further dynamic capabilities theory across diverse empirical high and low‐tech industry contexts.Practical implicationsLow technology sectors are considered a “forgotten sector” of innovation policies in small‐developed economies. Findings from this study identify a number of important implications of relevance to policy‐makers and managers.Originality/valueThis study contributes to the knowledge and understanding of how INVs in traditionally low‐tech sectors develop competitive advantage on international markets. The study presents an entrepreneurial perspective to the dynamic capabilities theory of the firm and presents a conceptual research framework to further understanding on INVs.

Is there new evidence to show that product and international diversification influence SMEs' performance?

PurposeThe purpose of this paper is to examine the joint effect of product and international diversification strategies on the performance of small and medium enterprises (SMEs) in Spain.Design/methodology/approachThe authors rely on a panel data of small and medium Spanish manufacturing enterprises over the period 1993‐2006, collected from the Spanish Survey of Business Strategies.FindingsThe evidence reveals the existence of a negative relationship between geographic expansion and profitability. Likewise, the adoption of both product and international diversification is not associated with higher performance.Research limitations/implicationsA promising avenue for future research is the analysis of firms located in different countries (for example, emerging economies), or the study of this issue considering factors such as the ownership structure (family firms, the role of the state and banks, etc.).Practical implicationsThe authors' analysis underlines the fact that the distinctive particularities of SMEs – for example, limited resources, lack of previous experience in the adoption of new products and accessing new markets – might constrain diversification as an alternative for firm growth. As a practical implication, Spanish SMEs should overcome their shortcomings before adopting diversification in order to improve the profitability associated with these strategies.Originality/valueAlthough Spain's economic structure is highly segmented and made up of mainly SMEs, research on these companies in this country is rather scarce. In particular, the distinctive characteristics of SMEs mean that diversification might have different performance implications than for larger companies. Moreover, the authors' analysis offers new insights compared to previous research, which has traditionally relied on cross‐section data.

The influence of operating strategies and firm's characteristics on factor productivity: Evidence from the lighting equipment industry in Taiwan

This study aimed at the influence of operating strategies and firms’ characteristics on factor productivity for the lighting equipment industry in Taiwan. Based on the theoretical framework, a linear structure model was constructed and the secondary data of 367 firms collected from of Taiwan Lighting Fixture Export Association in 2009 were used to perform a confirmatory analysis. By structural equation modeling (SEM), this study examined the relationship of different dimensional strategies and factor productivity and the empirical results showed that the internationalization strategy played a powerful role on influencing the factor productivity of the lighting equipment firms. However, the e-commence strategy would lead to a negative effect on their factor productivity, and there was no significant relationship between the strategy of product diversification and factor productivity. This study also found that the firm’s characteristics would bring a positive moderating effect on the relationship between operating strategies and factor productivity.

Building new competitive advantage through match between specific types of strategic flexibility and sourcing strategy

Strategic flexibility, sourcing strategy and organisational performance are often a source of contention among firms in manufacturing sector. This paper explores the effects of specific types of strategic flexibility ? related and unrelated product diversification ? that matched with specific types of sourcing strategy ? make and buy. Questionnaires were sent to respondents who were top management officers of firms from four major manufacturing sectors: electrical and electronics, chemicals including petroleum, food and beverages, and fabricated metal. The results confirmed that a specific type of sourcing strategy (make or buy) mediated a specific type of strategic flexibility (related or unrelated product diversification). Specifically, the make strategy partially mediated the relationship between related product diversification strategy and organisational performance, whereas the buy strategy partially mediated the relationship between unrelated product diversification strategy and organisational performance. These findings go along with the theories that support both constructs: industrial organisation theory, transaction cost theory and resource-based view. All these findings would enable practitioners to make better manufacturing and sourcing decisions.

Diversification: a road to inefficiency in product innovations?

Motivated by recent empirical observations made in industries such as the automobile industry, this paper employs an agent-based industry simulation model to examine the strategic relationship between product diversification strategies and some aspects of the product innovation strategy of a single producer. In particular, it is established that an increase in the average degree of product diversification in an industry increases the incentive for a producer to reduce the time to market for innovations at the expense of product quality. However, if all firms adapt their strategies according to these incentives, this results in a severe loss of average firm profits in the industry and also to a reduction in consumer surplus. It is then studied how the strength of this dilemma depends on several parameters describing the market structure and patent policy.

The effects of product diversification on firm performance and complementarities between products: A study of US casinos

In spite of the growing importance of product diversification strategy and the existence of varying degrees of product diversity in the US casino industry, research of the effect of product diversification on firm performance has been sparse. By examining the impact of the degree of product diversification on both financial market- and accounting-based firm performance of sampled US casinos and complementarities between products, this study attempts to fill the gap in the hospitality literature. Results of this study show an inverse U-shaped relationship between the degree of product diversification and firm performance and complementarities between gaming business and food and beverage (F&B) business. These findings suggest that US casinos take into account both costs and benefits associated with product diversification, and consider F&B operations more preferentially as a supplementary business when implementing product diversification strategy.

Internationalization and diversification strategies of agricultural cooperatives: a quantitative study of the agricultural cooperatives in the state of Parana

This study investigates the impact of internationalization on the results achieved by agricultural cooperatives in the State of Parana, at the same time examining strategies for diversification of markets as well as diversification of products aimed exclusively at international markets. Of the 28 cooperatives to be included in the study, 67.9% returned valid structured questionnaires. The collected data was submitted to non-parametric statistical analysis. Key findings suggest the following: external markets are served by indirect and direct exports; product diversification strategies are motivated by the creation of revenue alternatives to members and by the reduction of risks associated to agricultural business; diversification strategies are conceived to develop new business in accordance with market demand and to expand customized products from the existing portfolio; the formation of strategic alliances prioritizes access to distribution channels abroad; internationalization and diversification strategies produce positive results both from an economic and a social perspective.

Product diversification strategy and financial performance: meta-analytic evidence on causality and construct multidimensionality

We meta-analytically integrate empirical data from 104 studies published between 1970 and 2005 and test whether the popular proposition that diversification strategy impacts financial performance holds after controlling for the difference between correlational estimates that indicate mere association and such that allow for inferring causation. Drawing on a total sample size of 82,742 observations, we find that temporal sequence of variable measurement and multidimensionality of both diversification and performance construct strongly influence the nature of the linkage observed in empirical research. Meta-analytic results suggest that strategies of related and unrelated diversification are significantly associated with concurrent but not with subsequent accounting- and market-based performance. Most importantly, we find that there is no such thing as a universally valid nature of the diversification strategy–performance linkage. Drawing on a quantitative integration of the relevant literature of unprecedented scope and detail, our findings challenge earlier meta-analytic results and contemporary theory on the performance effects of diversification strategy. Our study also has important implications for measurement designs of future diversification–performance research.

Diversification strategy, capital structure, and the Asian financial crisis (1997–1998): evidence from Singapore firms

AbstractWe use agency theory to predict the influence of related and unrelated product diversification on a firm's level of debt financing. Further, we argue that the link between diversification and capital structure is moderated by the environment in which firms operate. Using SAS PROC MIXED, we fit a mixed‐effects model to our unique six‐year longitudinal dataset (1995–2000) of 245 publicly listed Singapore firms. Our data spans the period of the Asian Financial Crisis (1997–1998). We find that firms pursuing unrelated product diversification take on less debt financing in stable environments, but more debt financing in dynamic environments. Using longitudinal structural equation modeling, we find a reciprocal relationship between a firm's product diversification strategy and its debt financing level. Copyright © 2009 John Wiley & Sons, Ltd.