EPH - International Journal Of Business & Management Science

ISSN (Online): 2208-2190

Volume 09 Issue 03September 2023
DOI: [Link]

EFFECT OF MARKET DEVELOPMENT AND PRODUCT DIVERSIFACTION

STRATEGIES ON PERFORMANCE OF MEDIUM ENTERPRISES IN NORTH
CENTRAL NIGERIA
ADAMU Garba

*Department of Business Administration, Nasarawa State University, Keffi, Nigeria

*Corresponding Author:

Abstract
This study examined the effects of market development and product diversification strategies on the performance of
medium enterprises businesses in North Central Nigeria. The study utilised primary data from a sample of three
hundred eighty four (384) respondents from the selected medium enterprises who are managers or proprietors. The
collected data were analyzed using multiple linear regression. Using the probability value of regression estimates, the
study hypotheses were examined.. The result of the study shows that Market development (MDVP) has a positive impact
on the performance of Medium Enterprises (PFRM) in North Central Nigeria, and the effect is statistically significant
(p<0.05) and consistent with a priori expectations. Product diversification (PDIV) has a negative effect on the
performance of Medium Enterprises (PFRM) in North Central Nigeria and the effect is not statistically significant
(p>0.05) and also not in line with a priori expectation. It was concluded that developing new markets and expanding
product lines are two of the most prevalent company expansion tactics that organisations employ. It was recommended
among others that before embarking on product diversification, thorough market research is essential. This involves
analyzing customer needs, preferences, and purchasing behaviors in the target market segments.

Keywords:Market Development, Performance, Product Diversification, Medium Enterprises, North Central, Nigeria

Copyright 2023 EIJBMS

Distributed under Creative Commons CC-BY 4.0 OPEN ACCESS

Volume-9 | Issue-3 | September 2023 35

INTRODUCTION
The effect of market development and product diversification strategies on firm performance has been a topic of much
research. The general consensus is that diversification can have a positive impact on firm performance, but that the
relationship is complex and depends on a number of factors, including the type of diversification, the industry, and the
firm's resources and capabilities. Market development strategies involve expanding into new markets, either
domestically or internationally. This can be done through geographic expansion, product expansion, or both. Geographic
expansion involves selling existing products in new markets. Product expansion involves developing new products for
existing markets (Hitt, Ireland & Hoskisson, 2020). Product diversification strategies involve developing new products
or services that are unrelated to the firm's current products or services. This can be done through internal development,
acquisition, or joint ventures. The relationship between diversification and firm performance is often curvilinear, with an
inverted U-shaped curve. This means that there is an optimal level of diversification beyond which performance begins
to decline. The optimal level of diversification varies depending on the industry and the firm's resources and capabilities.
In general, firms that are diversified across related industries tend to perform better than firms that are diversified across
unrelated industries. This is because related diversification can lead to economies of scale, scope, and learning. Firms
that have strong resources and capabilities are also more likely to benefit from diversification. This is because they have
the resources to manage multiple businesses and the capabilities to exploit synergies between businesses (Varadarajan &
Jayachandran, 2019). Evidence suggests that diversification can have a positive impact on firm performance, but that the
relationship is complex and depends on a number of factors. Firms that are considering diversification should carefully
assess their own resources and capabilities, as well as the competitive environment, before making a decision.

Hofer (2013) opined that performance of medium enterprises is a context-based term for the thing being studied. In the
context of organizational financial performance, performance is a way to measure the change in a company's financial
state or the financial results that come from choices made by management and carried out by the company's members.
Since how these results are seen depends on the situation, the measures used to show success are chosen based on the
situation of the companies being looked at. The measures chosen show the results, whether they were good or bad
(Robert, 2014). In general, the idea of business success is based on the idea that a firm is the voluntary association of
productive assets, such as human, physical, and capital resources, to achieve a shared goal (Barney, 2011). People who
give the firm assets will only do so as long as they are happy with the value they get in return compared to other ways
they could use the assets. In this study, the success of medium-sized businesses is measured by their sales growth,
market shares, customer loyalty, and the number of customers who buy from them. These measures show how well
medium-sized businesses in the study area are doing in ways that aren't related to money.

Medium-sized businesses have a more voracious penetration than bigger corporations because their penetration is more
persistent. This is one reason why the private sector can hire more people than the government sector. Aga et al., (2015)
says that. Medium businesses are many times more common than big ones, and they also hire many more people.
Medium-sized businesses are thought to be able to do better because they can hire more people and use more effective
strategies. This is because small businesses that do well tend to grow into medium-sized businesses.

Statement of the Research Problem

The effect of market development and product diversification strategies on firm performance has been a topic of much
research in strategic management. The results of these studies have been mixed, with some finding that these strategies
can lead to improved performance, while others have found that they can lead to decreased performance. The reason for
the mixed results is that the effect of market development and diversification on performance can vary depending on a
number of factors, such as the ability to identify and develop new markets, the type of diversification, the industry in
which the medium-sized enterprise operates, and the enterprise management capabilities. In general, related
diversification is more likely to lead to improved performance than unrelated diversification. This is because related
diversification can help to reduce risk, share resources, and leverage core competencies. The objective of this research is
to understand the extent to which market development and product diversification strategies affect financial metrics,
market share, and overall business performance in a competitive and evolving market environment. The research also
seeks to uncover valuable insights that can guide medium-sized businesses in making informed decisions to improve
their performance and competitiveness.

Statement of the Hypotheses

The proposed research hypotheses for the study are:
H01: Market Development strategy has no significant effect on the Performance of Medium Enterprises in North Central
Nigeria.
H02: Product diversification strategy has no significant effect on the Performance of Medium Enterprises in North
Central Nigeria.

2.0 LITERATURE REVIEW

Conceptual Framework
Market Development strategy
Market development is a penetration strategy that identifies and develops new market segments for current products. A
market development strategy targets non-buying customers in currently targeted segments. It also targets new customers
Volume-9 | Issue-3 |September 2023 36
in new segments. In other words, market development is also a business strategy whereby a business attempts to find
new groups of buyers as potential customers for its existing products and services. In other words, the goal of market
development is to expand into untapped markets. These potential customer groups may already be served by competitors
or may not be currently marketed to by anyone for the product(Slater &Narver, 2018). A market development strategy
entails expanding the potential market through new users or new uses. New users can be defined as: new geographic
segments, new demographic segments, new institutional segments or new psychographic segments. Another way is to
expand sales through new uses for the product. In market development, penetration is achieved by seeking opportunities
by finding a new group of customers for its current product offering. This can be achieved by entering new geographical
markets within the country or opening new sales territories within the domestic market.

The organization tries within this strategy to enter new markets in the same current product without modification or
change, this is done by entering segments or new markets, so that the company can target new segments, in which the
company can achieve the required penetration. The new targeted segment can be a new groups of consumers or new
geographically markets (Jain, 2009). The researcher, considers that market development operations may be linked with
multiple risk such as: product non acceptance from new market or new market segment, therefore companies need
market researches to know the feasibility of such development for the market in particular. And market development
processes are often expensive financially, and the use of these strategies in products case is often linked with studying
product life cycle, so the company avoids its mature products to reach decline stage. Lambin (2016) indicated that there
are many possible ways to activate this strategy, namely: Opening new geographic markets, for example exporting the
product to a new country. Find new distribution channels (such as moving from retail sale to use e-commerce and mail
orders. Adopt a multi- pricing policies to attract new customers or to find new market segments. While Porter, (2005)
reported that application of this strategy needs: Identifying potential customers in the new market (their characteristics,
needs, and attitudes). To study and monitor market changes (income level, emergence of new professions). To look for
and to study the new distribution outlets. To study the market characteristics either local or international.

Market penetration is the simplest and first option for growth in most of firms Adamu (2023). It is defined as when
firms enter market with their existing product and services that was developed to permit businesses to know what
percentage of all possible sales was represented by their actual sales. They are already in the market with a present or on
hand product. Market Penetration is an attempt to increase firm sales without leaving original product market strategy at
the cost of rivals in the market (Ansoff, 1957). The company recuperates business performance by either mounting the
quantity of sales to it is on hand customers or by finding fresh customers for at hand products. This means mounting our
income by promoting the product, repositioning the product, and so on. However, the product is not changed and we do
not look for any new customers. This involves taking your on hand products, and advertising more of them to either
your existing customers, or new customers who fit your target market. The right combination of Market Penetration
improves the Performance of the Medium Enterprises in North Central, Nigeria.

The firm achieves penetration by developing new products that can serve existing product market Adamu, (2020a). The
strategy includes innovation creation that add value to existing product by improving the product features, creating a
bundling strategy for instance, producing a tooth brush that can serve customers of a tooth paste or selling a tooth paste
and giving tooth brush free to customers Adamu (2020b). Past studies have pointed out that a firms should take an
integrated or cross functional approach when pursuing new product development strategies to increase chances of
business success. The importance of understanding cross-functional interfaces in the development and implementation
of an effective business strategy is well identified in the literature (Day, 2008). Firms that are able to recognize and
manage these interfaces effectively gain a sustainable competitive advantage (Porter, 2005).

Market Diversification
Diversification is typically defined as a strategy, which takes the organization away from its current markets or product
or competencies (Johnson and Scholes, 2012). Product diversification concerns the scope of industries and markets in
which the firm competes and how managers buy, create and sell different products to match skills and strengths with
opportunities presented to the firm. It refers to the deployment of resources across lines of products. Rumelt (2011)
classified diversification as either related or unrelated. Product relatedness diversification is the extent to which a firm’s
different lines of products are linked while unrelatedness refers to a lack of direct links between products.

In diversification, penetration is achieved by expanding greater sales value by entering new line of business in the same
or related industry. In this strategy, the company tries to increase its sales size through entering new markets with new
products that may be related to old products or had no relation with old products. This strategy is the most dangerous
one compared with the three previous strategies because company wants to enter new markets with new products
without having an experience and complete knowledge of those new markets and products, and therefore companies
must have a clear idea based on studies and researches on new markets and products, and to carry out an honest
assessment of risks for the sake of right balance between risk and returns, and because it is the most dangerous it can be
very rewarding and this is consistent with the rule that says the greater the level of risk the greater the expected revenue
is expected (Murray and O'Driscoll, 2006).

Volume-9 | Issue-3 |September 2023 37

Wilson and Gilligan (2013) believes that the diversification strategy is used when profitable and selling opportunities
emerge for an organization outside of its current business, such as adding new line of product mix which it deals with, or
to increase mix depth by increasing products number in single-line. In this context, Porter (2005) reported that
organization obtains added strength in product diversification, which increases its customers number, and reduces the
likelihood of marketing risk, and that there are prospects for a rise in marketing costs as a result of the products number,
supply resources, their promotional expenses.

The main objective of adopting diversification strategy by economic institution is entering business areas that are
different from its products nature that it has now, they allow organization to expand its work and products, if this new
area which the organization introduce is associated with current business areas, this diversification is called
interconnected diversification, but if this area is not associated with organization current areas, they it follows un-
interconnected diversification strategy. In contrast, Economic Foundation may adopt internal diversification strategy by
using its internal resources, or through merging with another institution, or purchasing and possession of another
institution, so in this caps it has pursued external diversification strategy. It is possible that organization may perform
diversification through making horizontal integration or vertical integration; the latter may take the form of front or
backward diversification (Ulrike, 2017).

Performance of Medium Enterprises

The performance of medium enterprises refers to the overall effectiveness and success of these businesses in achieving
their objectives and goals. It involves evaluating their financial, operational, and strategic performance in relation to
their industry and market conditions. Elements and standards of performance should be able to be measured, understood,
checkedand reachable. SMEs' success is based on their marketing and entrepreneurship skills, their work environment,
and the materials and infrastructure they have access to. Hofer (2013) indicated that performance is a context-based term
that is related to the thing being studied. In the context of an organization's financial performance, performance is a way
to measure the change in the firm's financial state or the financial results that come from choices made by management
and carried out by company members. Since how these results are seen depends on the context, the measures used to
show success are chosen based on the situations of the firms being looked at. The measures chosen show the results,
whether they were good or bad (Robert, 2014).

In general, the idea of firm performance is based on the idea that a firm is the voluntary association of productive assets,
such as people, physical, and capital resources, to achieve a shared goal (Barney, 2011). People who give the firm assets
will only do so as long as they are happy with the value they get in return compared to other ways they could use the
assets. So, the most important part of success is making something of value. As long as the value achieved by using the
contributed assets is equal to or greater than the value expected by those who contributed the assets, the assets will
continue to be made available to the firm and the firm will continue to exist (Robert, 2014). There are a lot of different
ways to measure success. But in this study, sales growth and market share of medium-sized firms were used to measure
success. Sales growth is the difference between how much a company makes from sales now and how much it made
during a similar time period in the past, when sales were lower. Most of the time, it is given as a number. Sales growth
is good for a company's ability to stay in business and make money. Market shares are a product's share of real sales
(either in terms of the number of units sold or the amount of money spent) in a certain time period and place. It is the
amount of a market (in terms of either units or income) that a certain entity controls.

Empirical Review
Wakwoma (2007) carried out a survey of the product diversification strategies adopted by firms in the banking industry
in Kenya. The specific objectives of this study was to establish the extent to which commercial banks have adopted
product diversification strategies, determine the benefits of employing such strategies and the challenges faced thereof.
The study was based on a descriptive design; the population included all the 44 commercial banks operating in Kenya.
A census study was carried out due to a small number of banks. Data was collected by use of semi-structured
questionnaire, which was administered through drop, and pick and follow up done through email method. The response
rate was 82.5%. Data was analyzed using frequency tables, standard deviation and results presented in tables. The
research findings revealed that product diversification is adopted by commercial banks to a large extent. They widely
pursued related diversification with relative variation across banks. The main benefits cited for product diversification
strategy was increase in profitability, stability of earnings and customer loyalty while the main challenges faced was
increased cost of coordination among various new products. It is recommended that banks undertaking diversification
should do so in the context of explicit policy regarding what the objectives of such should be in order to minimize
pitfalls and increase shareholder value. The shortcoming of this study is that the specific locations where the banks were
sampled in Kenya were not disclosed in the work. It will be impossible to sample 44 banks in the whole of Kenya
without domiciling the study to a particular location. Also, the study did not indicate the research design used.

Bougherra, Rabeh and Nabila (2010) studied the impact of the diversification strategy on CONDOR firm competitive
using regression analysis. The results indicate that the diversification of products has a major impact on the
competitiveness of enterprise productivity, ranging from the qualitative difference to the quantitative impact.

Volume-9 | Issue-3 |September 2023 38

Al-Dosari (2010) studied the impact of growth strategy on marketing performance with the insurance companies and the
role of the Kuwaiti market orientation as a mediator variable using the Ordinary Least Squares. The results indicate that:
There is the presence of a statistically significant effect of the growth strategy (integration, diversification, focus) and
market orientation on marketing performance (profitability, market share) for insurance companies operating in the State
of Kuwait. The study recommended attention to diversity in providing insurance services by insurance companies of
Kuwait.

Muga and Santamaría (2008) examined Market penetration strategies and the Fee-performance relationship: The case of
Spanish Money Mutual Funds. This paper has shown that market penetration strategies are common practice during the
product introduction stage in the Money Mutual Funds in Spain. During this stage there is no relation between fees and
performance because this strategy is optimal. In order to analyse this relationship during the other stages of the product
life cycle, funds under three years old were omitted from the analysis. Among the remaining funds, those with the
highest fees are found to present a higher gross return than the low-fee funds, although the difference is not statistically
significant. Nevertheless, in terms of net returns, low-fee funds are observed to stochastically dominate high-fee funds
for any risk-averse investor. These findings hold for any managerial skill level or segmentation by mutual fund family
type.

Theoretical Framework
Resource-based View Theory (RBT)
The Resource-based view theory was propounded by Birger Wernerfelt in 1984. The RBT of the firm which was first
coined by Birger Wernerfelt in 1984 attempts an explanation of the relationship between the firm resources and
sustenance of modest advantage of superior firm performance and provides a theoretical ground for the assessment of
the firm’s specific factors that affect their performance and if any of these factors is lacking the performance of the firm
will be affected (Aliyu and Mahmood, 2014). Implicit in the resource-based perspective is the centrality of the
venture’s capabilities in explaining the firm’s performance. Resources have been found to be important antecedents to
products and ultimately to performance (Wernerfelt 1984). According to resource-based theorists, firms can achieve
sustained competitive advantage from such resources as strategic marketing (Powell, 2012), management skills
(Castanis and Helft, 2011), tacit knowledge (Polanyi, 2016), capital, employment of skilled personnel (Wernerfelt 1984)
among others.

The resource based theory is considered the most important theory for this study. This is because, for an organization to
effectively grow and expand into the various market identified by Ansoff using his categorization of the markets into
four (4), the resource-based perspective presents the fact that sustained competitive advantage is generated by the unique
bundle of resources at the core of the firm. Hence, the effective use of this resource is important in their quest to expand
into the market. The relevance of these theories cannot be overemphasized; it emphasizes the importance of the use of
strategies and resources in improving the firm's market share. This includes the quality of human resource, availability
of funds and the effectiveness of the strategy adopted such as market penetration strategy, product development and
product diversification strategies. Hence, resource-based view theory guides this work.

3.0 METHODOLOGY
Research Design
The study used a survey strategy that is based on the quantitative method. The survey method is a quick, cheap,
accurate, and efficient way to find out about a group of people. So, a poll method with a questionnaire as the tool for
collecting data is more appropriate for this study. This is because the study involves getting information from the owner-
managers of Medium Enterprises in order to find out how market development and product diversification affect the
success of Medium Enterprises in North Central, Nigeria.

Population, Sample and Sampling Techniques

Population of the Study
Nine thousand, five hundred eighty six (9,586) Medium Enterprises in the North Central States of Benue, Kwara, Kogi,
Nasarawa, Niger, Plateau, and the Federal Capital Territory (FCT) are the focus of the study.

Table 1: Sample Frame List

S/No State Number of Medium Enterprises Sample
1. Benue 1,168 1168/9586 * 384 = 47
2. Federal Capital Territory(FCT) 2,690 2690/9586*384=108
3. Kwara 226 226/9586*384=9
4. Kogi 844 844/9586*384=34
5 Nasarawa 1,120 1120/9586*384=45
6. Niger 1,358 1358/9586*384=54
7. Plateau 2,180 2180/9586*384=87
Total 9,586 384
Source: NBS/SMEDAN survey Report, 2022

Volume-9 | Issue-3 | September 2023 39

Sample and Sampling Techniques
The sample size for this study was calculated using Taro Yamane's method (1967) to figure out the size of the sample.
Taro Yamane's method is mostly for figuring out proportions, and it can only be used when the number of people in the
study is known. We use this formula because we are working with a group whose size is known and whose size is fixed.
Also, in a finite population, Taro Yamane's formula is used to figure out the right sample size when the original sample
size is more than 5% of the population size.

n = N/1+ N*(e) 2
Where:
n is the sample size,
1 is constant
N is the population size, and
e is the level precision (sample error) or the tolerable error in judging the population.
For the purpose of this study 5 percent tolerable error was allowed. Therefore, using the above formula we have;

n = 9586/1+9586*(0.05)2
= 9586/1+ 23.97
= 9586/24.97
= 384

So, the number of people in the study's group is about 384, which was chosen at random. The number of responders for
each State and Federal Capital Territory (FCT) was worked out using Bourley's formula from 1964, which is based on
the proportional distribution of people.

The Bowley’s formula is:

nh =
Where;
nh = the number of units allocated to each strata.
Nh = the number of participants in each strata (zone, ward, sector, state and so on)
n = the total sample size,
N = the population size
Applying this formula, we have;
Kwara State
Nh = 226*384/9586 = 9

Kogi State
Nh = 844*384/9586 = 34

Benue State
Nh = 1168*384/9586 = 47
Niger State
Nh = 1358*384/9586 = 54

Federal Capital Territory (FCT)

Nh = 2690*384/9586 = 108

Nasarawa State
Nh = 1120*384/9586 = 45

Plateau State
Nh = 2180*384/9586 = 87
The Questionnaire was distributed randomly to the respondents across the selected states.

For the study, two (2) different random methods were chosen and used in different ways. These are easy and purposeful
ways to pick people at random. Purposeful and simple random sampling were used to choose the necessary one
geopolitical zone (north central), six (6) states, and the FCT to be studied. The researcher used a simple random picking
method to choose the group of people to study for this study. The method gave each person in the target group an equal
and independent chance of being chosen for the sample. The researcher picked this method because it is easy to
understand and use.

Methods of Data Collection

Primary and secondary data were used to complete this investigation. Primary data was gathered primarily through the
use of questionnaires as the primary tool. First-hand information was gathered through fieldwork in the form of a
Volume-9 | Issue-3 | September 2023 40
closed-ended questionnaire for the primary data, while secondary data came from a review of relevant textbooks,
periodicals, lecture notes, newspapers, and online resources.

Two (2) research assistants were briefed on the proper administration of the surveys before they were given to the
selected respondents. To reduce the risk of instrument failure, we took extra care to ensure that respondents understood
how to fill out each section of the aforementioned questionnaire. This was important to reduce the likelihood of
duplicate responses being included in the final tally, which would have rendered the instrument useless. Target
respondents were given one of 384 questionnaires that were close-ended and organized. The research utilised a five (5)
point Likert scale, where SA = Strongly Agree, A = Agree, N = Neutral, D = Disagree, and SD = Strongly Disagree.

Validation and Reliability of Instrument

a) Validation of Instrument
Both content validity and construct validity, the two types of validity most commonly used, were taken into account in
this research. Construct validity was evaluated using a Factor Analytical tool that took into account Kaiser-Meyer-Olkin
(KMO) and Bartlett's Test of Sphericity (BTS), while content validity was established with the help of my supervisors
and other research methodological experts.

Table 1: Kaiser-Meyer-Olkin and Bartlett’s Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .945
Approx. Chi-Square .594
Bartlett's Test of Sphericity df 3
Sig. .028
Source: Researchers computation using SPSS 26.0

Kaiser-Meyer-Olkin (KMO) test results for the study's variable items show that sampling is adequate at the 95%
confidence level, with a value of 0.945, and a BTS value of 3 degrees of freedom and a significance level of p = 0.028.
In this case, the KMO result is less than the minimum required value of 0.50. As a result, we believe that the sample and
data we have collected are sufficient for this investigation.

Table 2: Total Variance Explained

Compon Initial Eigenvalues Extraction Sums of Squared Rotation Sums of Squared
ent Loadings Loadings
Total % of Cumulativ Total % of Cumulativ Total % of Cumulativ
Variance e % Variance e % Variance e %
1 1.117 37.221 37.221 1.117 37.221 37.221 1.114 37.126 37.126
2 1.089 36.296 73.518 1.089 36.296 73.518 1.092 36.391 73.518
3 .794 26.482 100.000
Extraction Method: Principal Component Analysis.
Source: Researchers computation using SPSS 26.0

The Total Variance Explanation table illustrates how the variance is distributed across the three potential factors. Two
factors have eigenvalues (a measure of variance explained) greater than 1.0, a common criterion for usefulness. When
the Eigenvalue is less than 1, the factor explains less information than would a singular item. Table 2 demonstrates that
Eigenvalues 1.117 and 1.089 exceed 1. First component variance was 37.126 and second component variance was
36.391. Components 1 and 2 of the rotated sum of squared loadings section account for 73.518% of the variance of the
study's total variables. This demonstrates that the instrument's construct validity is robust.

Table 3: Reliability Statistics

Variables Cronbach's Alpha
Performance of MEs [PFOM] 0.893
Market Development [MDVP] 0.824
Product Diversification [PDIV] 0.834
Total 0.850
Source: Author's Computation using SPSS 26.

Table 3 displays the reliability statistics for individual variables and the instrument's aggregate reliability. According to
the results of the study's individual variables, the dependent variable Performance of MEs has a reliability coefficient of
0.89, while the variable Market development has a reliability coefficient of 0.82. Diversification of products has a
reliability coefficient of 0.834%. The aggregate value of the Cronbach Alpha coefficient is 0.850. A Cronbach Alpha
statistic of 0.70 is deemed sufficient and reliable for social science research. Therefore, the instrument used to collect
data for this study exceeds the reliability threshold for Social Science research.

Volume-9 | Issue-3 | September 2023 41

Sources of Data
Secondary sources (documentary) such as textbooks, journals, dailies, publications, and bulletins are among the data
sources for the study. Primary sources of data, such as fieldwork, provided the study with firsthand information. This
information was obtained using a structured questionnaire.

Techniques for Data Analysis and Model Specification

Model Specification
Given the functional relationship between the study's variables, the implicit and explicit models for this investigation are
as shown below:

In this study, the performance of medium enterprises was measured in terms of market share and sales growth, which
were rolled into a single concept and incorporated in the questionnaire.

PFRM = f (MDVP, PDIV) - - - (1)

Where,
PFRM = Performance of Medium Enterprises
MDVP = Market Development
PDIV = Product Diversification

Therefore, the developed explicit form of the model and its specification is outlined below:

PFRM = b0 + b1MDVP + b2PDIV + Ut- - - - (2)

Where b0 = Constant or Intercept
b1, b2 = Regression Coefficients
Ut = Error terms
A priori expectation is given by
b1>0, b2>0

Methods of Data Analysis

Data on the effect of market development and product diversification on the performance of Medium Enterprises in
North Central Nigeria was gathered, coded, and analyzed using SPSS 26.0 for Microsoft Windows. Multiple linear
regression and other inferential statistics were used to determine the effect of market development and product
diversification on the performance of medium-sized businesses in the study area. The study's hypotheses were tested
using the regression estimates' probability values.

4.0 RESULTS AND DISCUSSIONS

In this section, the results of the study as analyzed from the field work is presented here. It starts with the presentation of
the regression standardized residual and the Normal P-P Plot of standardized regression residuals as shown in figure 1
and 2:

Performance of Medium Enterprises Model

Figure 1: Regression Standardized Residual. Figure 2: Normal P-P Plot

Source: Author's Computation using SPSS 26.0

Figure 1 shows a histogram of the residuals with a normal curve superimposed. The residuals look close to normal,
implying a normal distribution of data. Here is a plot of the residuals versus predicted dependent variable of

Volume-9 | Issue-3 | September 2023 42

Performance of Medium Enterprises. The pattern shown above indicates no problems with the assumption that the
residuals are normally distributed at each level of the dependent variable and constant in variance across levels of the
dependent variable of PFRM. The normal P-P plots indicates equal dots on opposite sides of the line. This is validates
the earlier result of normal distribution as reported in figure 1.

Table 4: Statistical Significance of the model

Model Sum of Squares df Mean Square F Sig.
Regression 19.586 2 43.307 4.427 .007b
1 Residual 736.214 17 9.783
Total 755.800 19
a. Dependent Variable: PFRM
b. Predictors: (Constant), PDIV, MDVP
Source: Author's Computation using SPSS 26.0

The F-ratio in the preceding ANOVA table tests whether the overall regression model fits the data well. The table
demonstrates that the independent variable PDIV & MDVP substantially predicts the dependent variable PFRM F (2,
17) = 4.427, p =.007b (i.e., the regression model fits the data well).

Table 5: Model summary

Model R R Square Adjusted R Square Std. Error of the Estimate
a
1 .980 .960 .868 6.58078
a. Predictors: (Constant), PDIV, MDVP
b. Dependent Variable: PFRM
Source: Author's Computation using SPSS 23.0

The coefficient of determination R2 for the study is 0.960. This indicates that 96.0% of the variations in the model can
be explained by the explanatory variable of the model while 4.0% of the variation can be attributed to unexplained
variation captured by the error term.

Table 6: Regression coefficients

Model Unstandardized Standardized t Sig. Collinearity Statistics
Coefficients Coefficients
B Std. Error Beta Tolerance VIF
(Constant) 24.836 8.194 3.031 .008
1 MDVP .487 .196 .295 2.485 .028 .992 1.008
PDIV -.130 .276 -.113 -.470 .644 .992 1.008
a. Dependent Variable: PFRM
Source: Author's Computation using SPSS 26.0

Table 6 demonstrates that market development (MDVP) has a positive impact on the performance of Medium
Enterprises (PFRM) in North Central Nigeria, and the effect is statistically significant (p<0.05) and consistent with a
priori expectations. This indicates that a unit increase in Market development (MDVP) will result in a 29.5%
improvement in the performance of Medium Enterprises in North Central Nigeria. The result of hypothesis one using
the probability value of the estimate indicates that we reject the null hypothesis, i.e., we accept that market development
has a significant positive effect on the performance of Medium Enterprises (PFRM) in North Central Nigeria at the 5%
level of significance. This result is consistent with the findings of Muga and Santamara (2008), who analyzed market
penetration strategies and the fee-performance relationship: During the product introduction phase of money mutual
funds in Spain, market penetration strategies that include market development are a prevalent practise, leading to
performance.

The result of the second objectives of the study of the study indicates that product diversification (PDIV) has a negative
effect on the performance of Medium Enterprises (PFRM) in North Central Nigeria and the effect is not statistically
significant (p>0.05) and also not in line with a priori expectation. This implies that when product diversification (PDIV)
is increased by a unit, it will result to a corresponding decrease in the performance of Medium Enterprises in North
Central Nigeria by a margin of 11.3%. The result of the hypothesis two using the probability value of the estimate shows
that we accept the null hypothesis, that is we accept that at 5% level of significance, product diversification has no
significant negative effect on the performance of Medium Enterprises (PFRM) in North Central Nigeria. This finding is
contrary to those of Bougherra, Rabeh and Nabila (2010) who studied the impact of the diversification strategy on
Condor firm competitiveness using regression analysis and found that product diversification has a positive effect on
performance. The positive effect is transmitted through increasing the turnover and increase market share and lower
prices by reducing costs. However, the negative effect found in the current study could be as a result of the fact that

Volume-9 | Issue-3 | September 2023 43

diversification is likely to be weaker in firms that operate in industries such as the medium enterprises as they are
characterized by high levels of competition. In general, related diversification, which involves entering new markets
with products that are related to the firm's existing products, is more likely to lead to improved performance than
unrelated diversification, which involves entering new markets with products that are unrelated to the firm's existing
products. These could be the factors which contributed to ensuring a negative effect of product diversification on the
performance of Medium Enterprises in the study area.

5.0 CONCLUSION AND RECOMMENDATION

Conclusion
The purpose of this study was to investigate the effect that increased product variety and market development have on
the success of medium-sized businesses in North Central Nigeria. The findings of the survey make it abundantly clear
that developing new markets and expanding their product lines are two of the most prevalent company expansion tactics
that organisations employ. The research that was done on the effects of developing new markets and introducing new
products indicated that both approaches have the potential to be successful in raising both sales and profitability.
However, the success of each tactic is contingent on a variety of circumstances, such as the nature of the company's
business, its intended audience, and the nature of the marketplace in which it operates. According to the findings of the
research, the performance of medium businesses in the area under investigation is favourably affected by market
development in a way that is both significant and favourable. It will have a better chance of being successful in markets
where there is an increasing demand for the company's products. The performance of medium firms in North Central
Nigeria was negatively impacted as a direct result of product diversification. It has a better chance of being successful in
markets where there is a great deal of competition or if the company's already-existing items are getting closer to
attaining their full potential.

Recommendations
Based on the findings from the study, it is recommended that:
i. Medium enterprises in North Central Nigeria should consider the following factors when evaluating market
development opportunities and setting up strategies to use the strategy to enhance business success:
a. The size and growth potential of the target market
b. The competitive landscape
c. The company's resources and capabilities
d. The company's risk tolerance

ii. Before embarking on product diversification, thorough market research is essential. This involves analyzing customer
needs, preferences, and purchasing behaviours in the target market segments. Identifying market gaps and opportunities
can help companies tailor their product offerings to meet customer demands effectively. A comprehensive
understanding of the competitive landscape and industry trends also allows for strategic positioning and differentiation

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