Empirical Studies Of The Diversification Strategy And Business Performance Of Chinese Listed Companies In Electronic Information

Strategies are essential to the development of enterprises and therefore they are attracting more and more attention from both scholars and managers. Diversification, one of the most important enterprise strategies, is inevitable for enterprises to reach a certain stage in their evolution. Diversification strategic theory serves as guidance for the development of enterprises and their endeavor to diversify their operations. Consequently, diversification strategy is well accepted by entrepreneurs and the theory has attracted many researchers.Diversification strategy has the advantage of risk reduction, efficient use of all the resources and capacity, expansion of business scope and size and cost reduction, thus significantly increasing the competitiveness of enterprises. However, it also has its disadvantages as it may make it more difficult to handle the management of enterprises, increase the cost for coordination and communication and add more risk of failures in financial affairs. There is evidence, both at home and abroad, showing that diversification can promote development and lead to better performance; however, there are also enterprises which are at the verge of bankruptcy after adopting the similar strategy. This is why diversification strategy is challenged by many scholars and entrepreneurs. Many empirical researches, about the performance of enterprising following diversification strategy, has already been done by researchers both in China and other parts of the world and consensus is so made so far.Research concerning diversification strategy in China was initiated in 1980s. The research findings were different from those done by researchers in other countries, partly because Chinese market has its unique characteristics, and Chinese researchers adopt different metrologies. So far it is not known yet whether diversification strategy is feasible for electronic information industry, as it is new and unique. This is the research gap of this thesis. Exploration will be made about the relationship between diversification strategy and performance; the status quo and the unique characteristics of electronic industry will be taken into consideration.The first chapter is mainly about the significance of my research and literary review. In 1957, the concept of diversification strategy was proposed by American enterprise strategist Ansoff; it refers to the strategy in which enterprises produce products or offer services in several distinct and irrelevant fields. Actually it was also in America that this strategy first made its way to the management of enterprises. It was considered to be highly effective in increasing profit, making full use of resources, reducing risks and enhancing competitiveness. However, later it appeared that this strategy was not perfect; people began to argue that it hinders the formation of core competitive power for enterprises and fails to either reduce the risk or increase profit.This paper will deal with the problem that whether the influence of diversification strategy on enterprises is positive or negative. The discussion will be made from two perspectives, theoretical and empirical. In the former part, profit theory and cost theory concerning diversification strategy will be elaborated while the latter part will mainly deals with the relationship between diversification strategy and performance. The conclusions made according to the literature review are as follows:there is a very complicated relationship between diversification strategy and performance of enterprises; there is no standard methodology for measurement of multiple variables; also, there is no systematic research on the performance of enterprises which have adopted diversification strategy.In the second chapter, a major proportion is devoted to the meaning of diversification strategy and its influence on enterprises; after a close examination of definitions proposed by various experts in this field, the present author comes up with her own opinion. According to industry classification of listed company specified by the China's Securities Regulatory Commission, the diversification strategy of listed company in electronic information industry refers to the practice by which enterprises offers services of electronic information for companies in two or more distinctly different major industries (labeled by a letter and a two-digital number). In the rest part, indicators of diversification will be introduced and Rumelt's classification of diversification types will be used. Influences of diversification strategy, both positive and negative, will be elaborated. In a word, the second chapter mainly deals the theoretical dimension of my research.An analysis of the status quo of Chinese listed companies in electronic information field and their operations are presented in Chapter 3. It has been pointed out that Chinese electronic information industry is characterized by its weakness in technological innovation, relatively narrow scope of application, lack of harmony between macro management and development of this field and imbalance among different parts of China. Also, a descriptive statistical analysis is made about the how diversification strategy is adopted in listed companies in Chinese electronic information industry..In the fourth chapter, a review is made about the existing research findings. The methodology used in the previous research has covered almost all the possible empirical research methods, such as variance analysis, correlation analysis, regress analysis and factor analysis. The empirical research mainly aims at exploring the influence of diversification strategy on the performance of enterprises; to achieve this, it is of vital importance to capture the relationship between the degree of diversification in the new economic environment and the performance of enterprises. It is also very important to discover some guiding principles based on the conclusions of the descriptive empirical studies. Linearity regress analysis and single factor variance analysis are used in the present thesis. Herfindahl Index is introduced to quantify the degree of diversification. The performance of enterprises is assessed according to their profitability, solvency, capital management and market value. Principles of sample choosing and the sources of final data are also specified. Then models of linearity regress and single factor variance are established. The final part offers more details about the procedures and findings.In the last chapter, on the basis of the findings from the empirical research, some suggestions are made about how to improve the diversification strategy adopted by listed companies in Chinese electronic information industry. The limitations of this thesis is also specified in this part. It is pointed out that with the development of Chinese economy and the improved management of enterprises, research on diversification strategy and its influence on the performance of enterprises is promising.The major contribution of my research is shown as follows. By careful designing and thorough analysis, new ideas are proposed on the basis of previous research. The present thesis makes studies on the diversification management strategy and its influence on performance from three perspectives, namely, aggregate extent of diversification strategy, the extent of diversification strategy relativity and types of diversification strategy. Also, my research deals with the listed companies in Chinese electronic information industry. They are neglected by most researches; however, in view of its vital importance, it merits intensive research in this field. The present author makes studies on the performance of Chinese listed electronic information companies, taking into consideration of the status quo of the electronic information field in China.Although much effort has been done to ensure the validity of the research, there are still some limitations. The major problems are that the sample size is not big enough and the reliability of the materials from which the statistics are obtained is not carefully checked. Only 54 listed electronic information companies are chosen and this may undermine the validity of the research findings. These problems should be attributed to the facts that in China there are not many electronic information technology companies in strict sense and that the criteria of industry classification is not objective enough. In addition, all the materials and statistics are obtained from the information released by companies and their reliability can not be totally ensured.