Corporate Diversification Strategy

Diversification is regarded as an efficient means that can decentre a companie's operation risk. Successful diversification should be based on the company's core capability. If a company plans to build up the core capability, it should operate the main business well. A successful diversification strategy must be a combination of core capability and market opportunity. Building up a sound industry value chain means that the company enters the fields which relates to it's main business. Directed investment, merging are always the methods the companies take to run the diversification strategy.Whatever methods that the company who carries a diversification strategy takes, a big sum of money is necessary for the company.Thus a stable financing channel is especially important. For a corporation, although it has been involved in many industries,and these industries always can provide a great deal of money.But in many conditions, the need always surpass the supply. If a big quality of money is drawn out, it must have great effect on the company's operation. If this problem cannot be solved well, the cash flow might even break. This is very serious and risky.The diversification strategy hasn't bring good results to the company which take this strategy in a long period of time in our country The business is too small to have advantage in scale The reason is that these companies are always lack of core capability. Although some companies control the industry by merger, but it develop too slowly to adapt the fast changing of the environment, say nothing of forming a monopoly situation in the industry. Now,in China as more and more companies carry the diversification strategy.,the combination of the industry and financing is also becoming a better choose of these companies.The companies who enter the finance fields should be very cautious to the risks when they run the diversification strategy. They should put much more effort on avoiding the operation risk. When a company plans to carry the diversification strategy , a series of rules must be founded at the same time.