Research On The Relation Between Diversification,Industry Synergy And Performance Of Coal Enterprise

Since the “ Twelfth Five-Year Plan ”, many coal enterprises’ operating performance has fluctuated greatly because of the impact of macroeconomic. At the same time, China’s coal enterprises have a large-scale losses for the impact of overcapacity, imported coal, pressure of environmental protection and weak demand of downstream industries since 2012. Coal enterprises depend on the coal industry excessively, leading to the restricted development for limited coal resources, coal market and coal downstream industry market. Simultaneously, at the policy level, the "ceiling" of coal consumption requires the coal enterprise to change the development mode of " the only dominance of coal" and a single management. Under the situation of new energy revolution, China’s coal enterprises combining their advantage of coal industry, actively develop related industries, such as electricity, coal chemical industry, coal equipment, etc, to achieve a diversified development.Based on the current situation of enterprise diversification and performance, this paper combines the current domestic and foreign research to study the relationship between diversification, industrial synergy and performance of coal enterprises.We construct the diversified measurement model of China’s listed coal enterprises. We mainly used the number of operations, Herfindahl-Hirschman Index and Entropy Index to measure the degree of diversification of the 10 listed coal companies from three aspects: the number of business operations, industry distribution uniformity and industrial relevance.The results show that the level of diversification of Chinese listed coal enterprises remains low, and there is still a large space to improve.Based on the theory of synergy and industry collaboration, we put forward the concept of coal industries synergy. coal industries synergy refers that the coal enterprise use the resource superiority, cost advantages and management advantages in the coal industry to develop relating industries to gain synergy effect, reduce production costs, improve production efficiency and professional level. To realize the complementary advantages, orderly operation, benign circle and common progress, the rational division and mutual cooperation in industry should be ensured. Ultimately it can help to achieve the overall goal of coal enterprises. According to the current situation of China’s listed coal enterprises, focusing on the coal industry, we construct six kinds of typical synergy model, including coal-electricity industry, coal-chemical industry, coal-building materials industry, coal- transportation industry, coal-steel industry and coal-equipment industry. Taking China Coal Energy as an example, and selecting three order parameters index, including scale synergy, market synergy and management synergy, we use the order parameter effect function method to build the measurement model of industrial cooperation. As the research result shown, the order of the coal- equipment subsystem is the highest, while the coal- electronic subsystem takes the second place, and the coal- chemical subsystem is relatively low.We conducted an empirical study on the relationship between diversification, industrial synergy and performance of listed coal enterprises. Selecting ten coal enterprises of high degree of diversification, through correlation analysis, regression analysis of the enterprise diversification and performance, we researched the correlation between diversification and performance. By summarizing the main influencing factors of the performance of listed coal enterprises, the path of diversification acting on performance is found. Synergy is the main path of enterprise diversification acting on the performance. This study takes China Coal Energy as an example to research on the relationship between Industrial Synergy and performance under the diversified management of enterprises. The regression analysis results show that the significance level of the linear equation, the quadratic equation and the cubic equation are 0.014, 0.05 and 0.048, and the linear equation is the highest.This research defined and predicted the optimal industrial size based on the current situation regarding China’s coal enterprises’ diversified development. The basic idea is to consider the enterprise capital, the human input constraints and industrial cooperation(primarily the scale of cooperation), and the political impact based on the principle of profit maximization, in order to build an optimal industrial size model using the linear programming method. China Coal Energy, a typical Chinese coal enterprise, was selected as an example of a coal enterprise with diversified development; its annual data fro 2010 to 2014 was analyzed to predict the optimal scale of respective industrial scale in 2016. The results showed that:(1) It is recommended to develop the chemical industry and expand the scale of production after comprehensively considering the profit ratio, industrial cooperation and the political environment.(2) The profit ratio of the coal industry kept decreasing, affected by the macro-economy and overcapacity problems; thus we propose compressing the production scale of coal block.(3) The production scale of the equipment manufacturing industry is influenced by the coal industry. With the decline of the production scale and the decreasing profit ratio of coal industry, we recommend compressing the production scale of the equipment manufacturing industry.(4) The scale of production in the power industry is influenced by the financing capacity of the coal enterprises. Since the total investment of these enterprises is fixed and we have already proposed greatly expanding the production scale of the chemical industry, with the addition of considerations regarding profit rate and political factors, we suggest maintaining or appropriately reducing the scale of the power industry.Researching on the relationship between diversification, industrial synergy and performance of coal enterprises could provide decision-making suggestions for diversified operation of coal enterprises.