Effect of Diversification Strategies on Financial Performance of Selected Manufacturing Firms in Rwanda

Sylvie Munganyinka and Tarus Thomas
University of Kigali
Email: sylviablessing23@gmail.com

Abstract: This study examined the effect of market diversification on financial performance of selected manufacturing firms in Kigali, Rwanda. The research aimed to assess how market diversification influences the financial performance of selected manufacturing firms. A descriptive research design employing a quantitative approach was used to provide a comprehensive understanding of the relationship between market diversification and financial performance. The target population included 125 respondents from selected manufacturing firms, with a final sample of 115 respondents participating through questionnaires. Data were analyzed using SPSS, applying both descriptive and inferential statistics. The findings revealed a strong positive relationship between market diversification and financial performance, with a Pearson correlation coefficientof r = 0.825 (p < 0.01). Regression analysis further confirmed that market diversification is a significant predictor of financial performance, highlighting its role in expanding market coverage, increasing customer reach, strengthening export activities, and creating additional business opportunities. Based on these findings, the study recommends that manufacturing firms continue expanding into multiple markets, strengthen geographical market coverage, increase participation in export markets, serve different customer segments, and distribute their market activities across different regions. These insights provide practical guidance for manufacturing firms in Kigali, Rwanda, seeking to use market diversification as a strategic approach to improve financial performance and sustain business growth.