Diversification Strategy And Corporate Performance In The New Normal Based On The Entropy Measure

During the past thirty years in China, either the beginning of industrialization in the early days of the reform or opening up, attracting foreign investment in the1990s or the honeymoon period with WTO in the early twenty-first century, China’s economy is in the cycle of increasing production-capacity. The enterprises are facing the international market, which is constantly expanding, and the domestic market where the residents’incomes are increasingly going up and demands are constantly being improved. Whether the scale expansion of the enterprises is to be focused in a single field or to initiate a strategy of diversification in a more comprehensive field, there are both successful stories. So in quite a long period, there is not a conclusion from researchers on whether enterprises should pursuit specialization or diversification.At present, China’s economy steps into the so-called "new normal", along with the GDP growth downward, industry overcapacity exacerbated and the beginning of the painful de-capacity, which brought new challenges for the enterprise management-shrinking market, increasing cost of financing, more and more fierce industry competition and the survival of only the strongest. In such background, the enterprise diversification management is facing severe challenges:under the "new normal", if they continue to implement diversification strategy, as a new entrant in a specific field with increasingly cruel competition and shrinking market, can they manage to gain their own comparative advantages and the ideal market share, to improve business performance and profits?This article selects the Shanghai and Shenzhen300listed companies as research samples, which are the most representative of the China’s economy. The author collects the detailed operating and financial data of the300companies in the2011-2013. By employing the entropy measure method, the author manually sorts and calculates the overall diversification, related diversification and unrelated diversification quantitative indicators of these enterprises, and respectively construct panel data regression model. Modeling results show that in the "new normal" diversification strategy cannot improve the operating performance of enterprises-related diversification, in statistical sense is not significantly positively related to corporate performance; Unrelated diversification will drag on the enterprise performance, regression results show significant negative correlation. This discovery is crucial for the enterprise strategic decision and the government macroeconomic regulation. When considering diversification strategy, enterprises should be prepared to meet the challenges in the "new normal" market, the diversification strategy in the short term may not be able to improve the enterprise’s business performance, so business leaders should balance long-term strategic benefits of diversification and short-term operating risk, so as to avoid unnecessary losses; The government’s economic regulation ideas should also adapt to the "new normal", shifting form "increasing inputs" to "promote total factor productivity", and help to guide enterprises to pursuit stronger and further developments in the field of professional subdivision.