An Empirical Study On The Relationship Between Diversification Strategy And Corporate Economic Performance Of Chinese Tourism Listed Companies

From the modern management theory angle, strategy is the corporate backbone, which could enable it to be stable. As we see, some enterprises standing hundreds of years and some just was being a flash in the pan. It is important for a corporation to select a proper development mode. In 1960's diversification became the most popular development mode that organizations all over the world pursued. In China, a number of corporations began their practice of the diversification strategies since 1990s. Comparing with our country, overseas academic research in diversification started earlier and more extensive. The relationship between diversification and economic performance is an important subject for the research in strategic management.Tourism is one of the fastest growing industries of the world. Along with the boom of Chinese economic and the improvement of people's living standard, tourism increasingly becomes an important industry of country economy. Because of the tourism industry's own feature, such as integration and uncertainty, diversification investment strategy will be beneficial to tourism to enhance its general competitive ability in order to avoid the system risk.In this thesis, twenty ShangHai Stock Exchange and ShenZhen Stock Exchange listed companies in tourism would be the research object. The thesis packed up these companies' trade earning structure and correlation finance data from 2001 to 2007 systematically, regarding the market index and finance index as the dependent variable that could define the corporate economic performance. The thesis used liner regression method to prove the diversification-performance relationship and the connection between the related diversification and the corporate performance. The result leads to the following conclusions:â‘ Over 80 percent Chinese tourism listed companies have taken diversification strategy at a low level of diversification's degree, and the related diversification samples' number will be more than the unrelated diversification samples.â‘¡Diversified operation improves corporate economic performance significantly: The higher diversification degree is, the better corporate performance becomes.â‘¢Related diversification could enhances corporate economic performance significantly, and unrelated diversification does not influence on corporate performance remarkably. The corporation should pay attention to the corporate object then when it is making the decision that whether the corporation should take diversification strategy. The decision-making of diversification degree should follow a temperate standard, making a comprehensive evaluation based on the resource and chance that the corporation has in the market. The corporate decision-making of choosing related or unrelated diversification should found on the internal conditions and the external environments too. The corporation must adjust itself constantly, during the process of strategy implementation, based on the variable conditions. It is important that corporation should foster own core competence and uses it as a started point to extend to various areas. Thus the corporate core competence inside could support its various operation units well and create an environment of sharing resource, and then the units' operations could strengthen the corporate core competence continually. This could form a benign cycle especially those enterprise that have monopoly resources. As a result, the tourism listed companies must identify its core competence when it taking the diversification strategy in order to avoid eyeless dilation.