Diversification Theory And Empirical Research

Selection of strategy is important to the survival and long-term development of an enterprise. China's enterprises began their diversification from the early stage of 1980's. As is known, enterprises are profit-seekers. So what is the effect of diversification on enterprises' economic performance? This is just the purpose of this thesis. There are six sections in total. Section Ⅰ introduces definition, classification and measurement of diversification. Section Ⅱ analyzes the causes and motivations of enterprises' diversification. Section Ⅲ discusses the previous empirical studies and conclusions made on the relationship between diversification and economic performance, as well as the relationship between diversification and corporate value. Section Ⅳ is the main body of this thesis. It makes empirical study of the relationship between diversification and economic performance in the three traditional industries, and explains the contradictions between results got and the reality. Section Ⅴ gives some forecasting of future development for China's industry and some suggestions on diversification strategy. Section Ⅵ gives the final conclusions and the shortcomings of this thesis. The final conclusions of this thesis are: diversification and focusing are not two completely opposite strategies. Neither of them will determine the economic performance. Strategies selecting and performing is a process of combing static analysis with dynamic analysis and must take account of external and internal environments. The final strategy must be established on the basis of enterprises' core competences.