A Study On The Companies’ Motivation And Performance Of Diversification

In spite of many unsuccessful cases of implementing diversification strategy, it is still a popular choice for the enterprises when they develop to a certain stage, especially for state owned corporations. What are the reasons for the enterprises choosing diversification strategy since there are so many failures? What are their incentives? This paper will research on diversification strategy of Hunan Jinjian Cereals Industry Co., Ltd. The incentives of implementing diversification strategy and the causes of its failure will be discussed.Through the research on the case of Hunan Jinjian Cereals Industry Co., Ltd, the incentives of implementing diversification strategy are diversifying risks, the local government’s interventions, the managers’ pursuit of personal interests and the redundant resources the company has. The causes of the failure are the lack of objective and scientific analysis before the business expansion, core business being ignored, the rupture of the capital chain and the lagging management level. Finally, this paper puts suggestions for the above problems:improve and perfect the system of management; structure a clear development plan; strengthen the core competitiveness; reduce government interventions.