Effect Of Product Proliferation Strategies On Firm Performance

Product proliferation strategies have been concerned by researchers for a long time, and they are directly related to the allocations of resources, profitability and competitive marketplace of the firm. Therefore, in order to maintains the higher long-term profitability, it is an increasing concern at home and abroad in how to choose the proper product proliferation strategies and how to regulate reasonably the product complexities. Product proliferation strategies, as the guiding principles for business management decision, have important effect on the firm performance. Current researches focus on the effect of product proliferation models and methods on firm performance. While little researches focus on the entire product proliferation strategies, and there is no uniform conclusion about the effect of product proliferation strategies on firm performance. Therefore, this article focuses on the product proliferation strategies, based on which the influence rules of product proliferation strategies on the firm performance and the different effects of different product complexities on the product proliferation strategies and firm performance are investigated.Different product proliferation strategies have distinct influence on firm performance. The relationship between two types of product proliferation(across-niche product proliferation and within-niche product proliferation) strategies, and the moderating effect of product complexity on product proliferation strategies and firm performance are analyzed based on the panel data of 32 car firms from the year 2008-2012 in China. First, the effect of product proliferation strategies on firm performance is analyzed based on regression analysis, hypothesis testing and multinomial distribution model. Then the product complexity is introduced to analyze the relationship between the product proliferation and firm performance. The different effects of different product complexities on the product proliferation strategies and firm performance are demonstrated based on empirical analysis.Results show that the correlation between the two types of product proliferation and firm performance turns from negative to positive, indicating there exists a U-shaped relationship between the two types of product proliferation and firm performance. Results also indicate that the product complexity can strengthen the relationship between across-niche product proliferation strategies and firm performance, and weaken the relationship between within-niche product proliferation strategies and firm performance. Therefore, an enterprise should choose proper product proliferation strategies and take full advantage of the moderating effect of product complexity based on their own positions. So that it can get twice the result with half the effort in firm performance.