Study On The Influence Of Management Power On Diversification Strategy And Diversified Enterprise Growth

In the face of continuous growing of social economy and the gradual strengthening ofthe market competition, many companies seek new investment opportunities toachieve long-term development. The implementation of the diversification strategy isan effective way to achieve this goal. Through diversification strategy, companies cannot only take advantage of the remaining cash flow, but also create synergies offinance, management, tax and other aspects. Diversification can help companiesexpand the scale, improve performance and achieve sustainable development.However, in reality some companies ignore the original main business because ofdiversification strategy. They take blind expansion into new areas resulting inover-investment. So these companies can not achieve the goal of diversificationstrategy and will reduce the original competition ability leading to a negative impacton performance. Exactly what causes the different benefit to diversified management?Many scholars have studied on this problem.On the base of the existing research,thispaper presents that the management power is one of the important factors affectingenterprise diversification and the strength of the management power can affectcorporate performance after the diversification.In order to study the effect of management power of diversification, this article studythe subject in accordance with the train of thought of managementpower—diversification operation—diversification performance. At first,the articlereviews the domestic and foreign scholars about the management power,diversification,diversified performance research and summarize the related research.Later this paper reviews the theory of diversification and management power theoryand provides the theory support for the research hypothesis. According to thetheoretical basis, the article raises two research hypothesis: hypothesis1: Companieswith stronger management power have higher degree of diversification relatived tothose companies which have weaker management power. Hypothesis2: Companieswith stronger management power will further reduce the performance of diversifiedbusinesses compared with the companies with weaker management power. Finallyaccording to the two research hypotheses, the article establishes two relevantregression models and uses the SPSS analysis software for data descriptive statisticsand regression analysis. At last,the article presents the following two conclusions according to the regression results:（1）The companies with stronger management power tend to diversify. Regressionresults show that there are positive correlation relationship between diversificationand management power.It means that the enterprise diversification will be deeper withthe strengthening of management power.（2）The performance of companies with stronger management power will deterioratefurther after the implementation of diversification operation. Model uses a interactionterm of management powers and diversification to test the hypothesis2. The resultsshow that the companies with stronger management power have worse growth afterdiversification operation ompared to other companies.Finally, the article presents some recommendations of enterprise diversification basedon the conclusions, including strengthening the construction of the independentdirector system, improving the incentive appraisal system and strengthening theconstruction manager market. The construction of these systems can avoid the abuseof management power to carry out diversification strategy which will have a longtime negative impact on sustainable development of enterprises.