Research On The Relationship Between The Level Of Diversification And Corporate Performance On Medicl Listed Company

Since the Reform and Opening-up, the pharmaceutical industry in China hasbeen in a state of rapid development. During the years between1998and2011,China’s pharmaceutical industry is growing with an average annual growth rate ofabout20%. However, high speed of development does not necessarily represent highcomptitiveness. At the moment, our country has a large number of pharmaceuticalcompanies. Those companies have low industrial concentration and are growing inextensive growth modes in general. With the vigorous development of real estate,stock market and import and export trade in recent years, more and more listedmedical companies changed their operating stragegy from single industry focused todiversification. But the problem for those listed companies that choose diversificationstrategy is that they are lacking in the knowledge of recogning and nurchuring corecompetence. In order to expand their size, they apply deversification strategy blindly.They are too eager to pursuit the scale of economy, and they forget the fundamental ofbusiness growth is to build a better and stronger company.Enterprise’s diversification should base on theirs core competence，this researchjust takes this viewpoint as the basic point.According to the sample of listedcompanies in manufacture industry，we make an empirical analysis on whether thediversification which based on core competence is beneficial to the improvement ofbusiness performance. In this paper，we establish three models which includediversified level， core competitiveness and business performance，also，we dividethe level of diversification into related diversification and non-related diversification， besides，we build submodels of the core competence which contains the manage corecompetence，marketing core competence and financial core competence.The resultsshow that:firstly，based on the general model，we draw a conclusion that showinverted u-shaped among the relationship of core competence，business performanceand the degree of diversification， and the core competence can significantly improvethe business performance.Secondly，we make a conclusion that related diversificationhave positive effect on the management，market and financial of core competencefrom submodel A，but it is not significant.Thirdly，from the submodel B，we find thatthe manage core competence and the marketing core competence have a significantpromotion effect on profit index，growth index and scale index，however，the capitaloperation core competence can’t significantly influence the scale index.Fourthly，as aresult of submodel C， that related diversification have a significant promotion effecton profit index，growth index and scale index，whereas，non-related diversificationcause significant and negative impact on profit index and scale index，but notsignificant on growth index.