Strategic Management And Financial Effect Research On Vertical Integration Of Industry Chain:A Case Study Based On Letv

During the past 40 years,such rapid development occurred in China after the reform and opening up policy being applied.The primary industry, secondary industry and tertiary industry have been fully developed.Especially on the path of rapid development of industrialization,the production capacity of some industries over the level of demand after entering the 21st century. Both the enterprises and the government hope to reduce the leveraging,lower the cost and improve the profitability. Accordingly,vertical integration of industry chain strategy aimed at the needs of users as a starting point is a perfect development strategy for many enterprises to expand scale, enhance operational efficiency, reduce transaction costs and do good to customers.On the contrary of slow manufacture development,the Internet industry has made great development over the past two years.The relation between the Internet industry and the offline traditional manufacturing and services becomes more and more closely.Internet companies via the way of integrating upstream and downstream resources,starting from the user requirements, redesigning the process to achieve the aim of " Internet+Manufacturing" and common value maximization in the end.This paper studied the Internet company:Letv which is an A-share listed company, Letv is also the first company of Internet industry which has achieved success under the vertical integration of chain strategy.According to a great deal of data analyses and logical argumentation,the paper hope to answer the following questions:the real vertical integration of industry chain strategy is not a simple model of "Hardware+Software", what is its core of the strategy? What are the resources of strategy value? What is the profit model?What kind of the financial effects referring to vertical integration of industry chain strategy?What are the risks of the strategy? Whether a general enterprise should follow the strategy?Through the methodology of case study,this paper analysed the vertical integration of industrial chain strategy for Letv.For the upstream industrial,Letv controlled video content supply through merging the film and television making companies.For the downstream companies,Letv entered the manufacture industry of video broadcast terminals such as mobile,TV by outsourcing or controlling stock of traditional companies.This paper is based on the Internet industry chain vertical integration strategy background,motivation, foundation,business model and profit model.According to a large number of data,this paper analysed financial effect of the strategy. At the same timc,this paper pointed out that the risks of strategy implementation.Eventually,this paper drew to the conclusion that whether a general enterprise should follow the strategy.Under the tide of "Internet+", the vertical integration of industrial chain strategy referring to internet companies is more significant for application value.It is hoped that this paper would provide references for Chinese enterprises which long for transition through the in-depth analyses of the pioneer:Letv,which applied the vertical integration of industrial chain strategy.