Academy of Strategic Management Journal (Print ISSN: 1544-1458; Online ISSN: 1939-6104)


Corporate Diversification: A Fundamental Exploration of General Business Environments, Industry Environments and Firm Characteristics

Author(s): Jolly Sahni, Ariff Syah Juhari

Diversification has been central in the area of strategic management. Businesses in many countries have used diversification as the means to advance its economic progress. For Saudi Arabia to reach their vision by 2030, corporate diversification will be central to achieve a ‘short-cut’, if you will, in fulfilling its ambition. Researches in various disciplines are growing to propose creative solutions and approaches to achieve specific areas of the vision. However, the challenge should begin at solidifying corporate relationships that will soon connect various industries towards the common goals that have been presented before all stakeholders. Therefore, the purpose of this paper is to develop a framework for corporate diversification, based on general business, industry environments and the firm’s characteristics, and its effects on performance, to prepare firms to better understand its environments and characteristics in the context of developing countries in general and Saudi Arabia in particular. Data was collected from 62 managers representing their respective firms in Saudi Arabia’s petrochemical, construction, banking and financial sectors, retail sectors, telecommunications and ICT, and the transportation sector. A combination of parametric and non-parametric tests was carried out using SPSS 22.0. The findings of this study suggest that the most used expansion strategy by far is internal capacity expansion. Additionally, businesses in Saudi Arabia mostly diversify by adding new products to their product line. Based on ResourceBased View (RBV), Skilled and competent technical staff, highly trained operatives, ability to access and retain highly qualified subcontractors and specialist labor factors were managed in most of the surveyed corporations. Further, almost all the surveyed corporations identified their strengths to be the skill and competency of their technical staff. Interestingly, however, communications and information technology were identified as the main weaknesses of these corporations. In the current state of things, a positive note is the indication that there have been improvements in the utilization of resources by these corporations, amongst some other benefits. However, the main barriers revealed the biggest concern being that there have been too many activities unrelated to the main business. This framework has never been tested on businesses in Saudi Arabia.

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