Title page for ETD etd-06242012-155306


Document Type Master's Dissertation
Author Deonanan, Averen
URN etd-06242012-155306
Document Title Diversification as a corporate strategy : an assessment of financial performance of industrial companies in South Africa
Degree MBA
Department Gordon Institute of Business Science
Supervisor
Advisor Name Title
Dr A Saville Supervisor
Keywords
  • corporate strategy
  • diversification
  • financial performance
Date 2012-03-08
Availability unrestricted
Abstract
Corporate strategy forms the foundation when considering the strategic alternatives available to an organisation. Corporate diversification and specialisation are two of the more popular configurations often proposed by corporate strategy theory in order to grow and sustain financial performance. The issue of whether or not diversification leads to financial performance has been debated since the early 1950s. Ample research has been conducted from an international perspective. However, the findings have been inconclusive/mixed/inconsistent and there remains a lack of consensus regarding the diversification-performance relationship.

This study attempts to provide clarity on the matter by using a quantitative method to assess the financial performance of companies listed on the industrial sector of the Johannesburg Securities Exchange (JSE) for the period 2003 to 2010. Thirty-nine companies met the criteria for inclusion in the sample and were classified as either focused, moderately or highly diversified. Three financial measures were compared for the different categories, namely return on average equity, return on average assets and market return.

Two of the three hypotheses are not statistically significant and the differences in the average (mean) performance measures are due to sampling error. One of the performance measures, return on assets, indicates that the difference in the ii average (mean) performance is statistically significant. The pairwise comparisons revealed significant differences between highly and moderately diversified companies as well as between moderately diversified and focused companies. The mean difference between focused and highly diversified companies was not statistically significant. In this regard, moderately diversified companies performed better than highly diversified and focused companies.

2011, University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria.

Please cite as follows:

Deonanan, A 2011, Diversification as a corporate strategy : an assessment of financial performance of industrial companies in South Africa, MBA dissertation, University of Pretoria, Pretoria, viewed yymmdd < http://upetd.up.ac.za/thesis/available/etd-06242012-155306/ >

F/12/4/644/zw

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