Based On The Core Competitiveness Of The Diversification Strategy - And The Enron Bankruptcy Case

The full text is divided into three parts. The first part is a review of the case of Enron, who was once the largest energy company in U.S., and collapsed at the end of 2001 due to its blind expansion and excessive investment in the process of diversification strategy.Part two points out that the core competence is the guarantee of the healthy development of an enterprise, and also the base of the competitive advantages of a company. The core competence of ChunLan, which is a giant in home appliance industry in China, is the soul of its various capabilities and corporate culture during its technical innovation, quality management, cost control and marketing. The conformity and optimizing of its corporate value chain is shaped during years of experiences. The situation of core competence in China is not very optimistic: first, most enterprises haven't paid enough attention to cultivate its core competence; second, misunderstanding of core competence still exists. In order to change this situation, we should, first, to build up the spirit of independence and competition; second, to conform various resource advantages; last, but not the least, to recognize the value of talents.Part three elaborates that the diversification strategy should be based upon one's core competence. The diversification strategy can be divided into two catalogues, say, relevant and non-relevant diversification. There're many factors that could affect one's diversification strategy, such as the interior resources, market and industry status. However, the diversification strategy is a two-blade sword, on the one hand, it can take full advantage of one's redundant resources, spread around risks and cut cost; on the other hand, it may cause management chaos and overage investment. No matter which kind of model it follows, a company should always keep on cultivating and strengthening its core competence. During the process of diversification strategy of Chinese enterprises, the biggest problem is the ignorance of cultivating of core competence and blind expansion. As a solution, first, presently choosing relevant diversification strategy; second, adopting an optimal access of business after comprehensive consideration; third, re-constructing the business unit after implementation of diversification strategy, and fourth, building up proper organization structure to meet the need of diversification strategy.