An Empirical Study Of Profit Ability, Growth Ability And Stability Of Achievements On The Management Performance Of The Listed Textile Enterprises That Using Diversification Strategy

Diversification strategy is contrary to specialization strategy. Diversification strategy is a management strategy. It means that on the basis of companies'original services, companies get their ways into new fields by mergering, recombining or adding new works. From the 1990s, diversification strategy has been using by the textile companies of our country, and some companies succeeded, but others couldn't get profit from the strategy.The development of textile industry which is an eternal industry, an ascendant industry of our country and a main industry that can earn by exporting, works a direct effect to the circulation of national economy. Therefore, this essay is just a study to the effect making by diversification strategy to the management performance of the public textile enterprises. This essay chose 51 public textile companies as a sample. In this essay, I found some problems that existing in these companies. The areas, industries and sources distribution of the companies are small and unreasonable, and some of them have inferior technology and have to face to the pressure of the risk that works by the trading and foreign exchanging. Some of them have poor management performance and can't develop continuatively. Therefore, many companies have adopted the diversification strategy, including sidelong diversification and endlong diversification. Many of them have flushed into the industries of real estate, the sources of energy, medicine, electron communication, industry investments etc. Their motivation for doing these is to disperse risks, to cultivate new fields for profit earnings, to make good use of their resources, to achieve range economy and for the administrant to get individual benefits.According to the relationship between the products and services which the companies render, companies can be devided into there groups by using entropy diversified index, which are low diversification, related diversification and non-related diversification. Adopting the arithmetic mean value of the indexes from 2003 to 2005, this essay studies the relationship between the diversification strategy and the profit ability, growth ability and stability of achievements of the public textile companies, by using variance analysis and correlation analysis. The findings of the analysis: the profit abilities of the companies increased with the ascension of the level of diversification. the growth of the ratio of main products'profit and the growth of the ratio of net profit increased with the ascension of the level of diversification, while the growth of the ratio of assets and the growth of the ratio of main products'income declined with the ascension of the level of non-related diversification. The companies'risks can be dispersed somehow by adopting diversified strategy, and the management performance could get better, while the level of diversification increased. From the analysis, the essay found that the management performances of companies adopting related diversification strategy are better than others. This essay also analyzed the representative enterprise which also adopted the diversification strategy——Youngor Corp. incorporated company, and found that the company's management performance is confirmed to our findings.Through the above theoretical analysis and empirical analysis, we can believe that moderate diversification is feasible and reasonable for textile companies of our country presently. This essay makes a prospect for the diversification strategy which the textile companies can adopt. This essay suggests that textile companies should make a great effort to develop their main products and services to cultivate the core competitive ability. Then, they can get into new industries to format moderate diversification.