Challenges of Diversification Strategy Implementation and Competitive Advantage of Private Hospitals in Nairobi County

Abstract

Diversification strategy increases the number of business units or divisions hence increase in business complexity that top managers must oversee. This study sought to determine the effects of diversification strategy on competitive advantage and the challenges of implementation in private hospitals in the county of Nairobi. The target population was 36 private hospitals in the county of Nairobi and structured questionnaires were used to collect primary data from one top level or business unit manager in each of the organizations. A response rate of 53% was achieved during data collection. The questionnaires were validated for completeness, the data was coded, tabulated and analyzed through descriptive statistics and regression analysis. Descriptive statistics used included percentages, means, frequencies and standard deviation while inferential statistics used was linear regression and ANOVA. The study found that 32% of the variations in competitive advantage could be explained by the predictor variables which were horizontal integration, vertical integration, related diversification and unrelated diversification. The study also found that the predominant dimension of diversification strategy in private hospitals in Nairobi county was related diversification while vertical integration and horizontal integration were implemented to a moderate extent. Unrelated diversification was the least used dimension of diversification. The study found out that there is a positive effect of horizontal integration, vertical integration and related diversification on the competitive advantage of private hospitals in Nairobi county and that there is a negative effect of unrelated diversification on competitive advantage. High capital requirements, organizational culture, organizational structure and leadership were the leading challenges to implementation of diversification strategy. The study recommends the use of horizontal integration, vertical integration and related diversification as the growth strategies likely to have positive effect on the competitiveness of private hospitals in Nairobi county. Private hospitals in Nairobi county need to implement dimensions of diversification strategy proven to lead to competitive advantage to maximize shareholder value and prevent organizational failure.