A Study On The Financial Approaches To Enterprises Diversification Strategy

As a strategy choice, the diversification strategy has been attached great importance to in the current unbalanced socialistic market. Thanks to the diversification strategy, some enterprises have become large companies at a rapid growth, while some others got bankrupted. The failure of diversification strategy always comes down to the financial problems, such as insolvency, the disconnection of the capital chain, severe deficit and even bankruptcy. In recent years, in order to developing corporate strategy better, theorists have done a lot of cross-research on the intersectant fields between the corporate strategy and managing function. But the theory of finance strategy is immature, so the existing finance theory cannot provide adequate operational approaches to the diversification strategy.Because of the extreme importance of the financial management to the diversified strategy, this thesis works on the aspect of finance and tries to table a operational proposal on the diversification strategy. The current cross-research between the diversification strategy and finance is focused on the theoretical aspect, and few practical measures have been worded out. Therefore, this thesis focused on the operational approaches, is committed to introduce financial means to the diversification strategy. And the thesis will provide for companies, which are under diversification strategy, the quantitative and programmed operating process and standards.This thesis is based on some classic theories: The theory of internal capital markets (ICM) bridged the unrelated diversification strategies and the financial theory;and the theory of Portfolio Selection provide valuable guides to the Business Portfolio;and the theory of BCG matrix and value chain provide indispensable analytical tools for the analysis on the diversification businesses;and the mature Financial Distress Warning Systems (FDWS) can be used to monitor the financial health of the diversification strategy companies.The research steps can be described as follow:Firstly, to classify the diversification strategy into Unrelated Diversification Strategy (UDS) and Related Diversification Strategy (RDS).Secondly, to divide UDS businesses into stars, cash cows, Question Marks and dogs, and then develop corresponding financial approaches for different types businesses, and at last integrate diversification strategy and financial approaches into one;To disassemble the RDS businesses into taches by Value Chain, and then transfuse financial elements into the taches, and at last integrate diversification strategy and financial approaches into a united system.Thirdly, based on FDWS, to monitor and feed back the financial condition regularly.Finally, to process a positive analysis, taking Delong Group as the case, demonstrate the use of financial approaches to enterprises diversification strategy and prove its correctness and feasibility.Based on the BCG matrix and Value Chain, the thesis divides the diversification businesses into many sorts or taches, and then transfuses financial elements into them separately, which makes the financial approaches to enterprises diversification strategy. This is the possible innovation of this thesis.