How Innovation Affects Implementation of Diversification Strategy in Soft Drinks Processing Industry in Nairobi City County

Abstract

Implementation of diversification strategies and innovation are critical for growth and competitiveness of any organization. In the modern days no organizations can be able to successfully be competitive without applying innovation or diversification strategy. Any serious organization that wants to stand out must provide a product that specifically meets the needs of the customer. The customer must also be satisfied that he/she is obtaining value from the supplied product. The soft drink industry in Kenya has seen entry and exit of quite a number of players with some closing down soon after inception. Given the heightened competition in the industry there is need to be innovative and to diversify. The study wanted to assess whether innovation affects implementation of diversification strategy in soft drinks processing industry in Nairobi City County, Kenya. The research was guided by Ansoff’s Matrix theory, Resource-based view, Agency theory, and Market Based view. It also reviewed Empirical studies by other scholars on innovation and diversification strategy implementation. The study used a cross sectional survey design. The population of study was the 13 soft drinks processing firms in the industry in Nairobi City County as per KAM 2016. The study purposively selected six of the firms which were used as the unit of analysis. The management staffs of the selected firms were used as the respondents. The study used primary data which was collected by use of self-administered closed questionnaire. Data analysis was done by use of descriptive statistics such as frequencies, percentages, mean scores and standard deviation with the aid of SPSS and presented through tables, charts, graphs, frequencies and percentages. The industry was found to embrace product, process and market innovation practices and also implemented diversification strategy. Coefficient of correlation was 0.861, which shows of strong positive correlation among the variables. Adjusted coefficient of determination was 0.728 which translates 72.8%. The residual was 27.2 which could not be explained by the independent variables. The study concluded that product innovation, process innovation and market innovation had a positive and significant influence on the implementation of the diversification strategy. Process innovation had the greatest influence. It was recommended that the industry should select the right diversification strategy based on their innovation capacity, resources and market dynamics. The study recommends that more studies be done using other designs and also include more firms in the informal side of soft drinks processing industry.