Research On Financial Crisis Under Diversified Expansion

With the development of global economic integration,enterprises are facing increasingly competitive environment.In order to gain greater benefits in the market competition,many enterprises adopt the strategy of diversification,by the means of setting up companies,mergers and acquisitions,to expand its business.By the strategy of diversification,these enterprises try to get synergies,expand the scale of business and profits,and improve their competitiveness.However,the expansion of enterprises needs support on the management capability and resources.For these enterprises,liquidity is the most important financial resources.Once the expansion goes too fast without sufficient support on financing,these companies may fall into a financial crisis.In November 2016,the Letv Group's financial crisis under the diversification expansion had happened,so there has a strong timeliness and practical significance on the study of Letv Group's financial crisis.This article creatively defines the Letv Group's as the series of affiliated enterprises regarded as the brand of Letv and controlled by the same ultimate controller,and selects it as a study case.It mainly studies the financial crisis of the Letv Group by analyzing financial and non-financial information since the implementation of diversification expansion strategy in 2012.Through the research on the internal operation and management and the external economic environment of the Letv Group,it explores the root causes of the financial crisis and puts forward effective countermeasures and suggestions to prevent the further deterioration of the financial situation,solve the current financial crisis and achieve sustainable development.Specifically,this article is divided into the following sections:First of all,this paper summarizes the core concepts and related theories of the strategy of diversification and financial crisis,then leads to case study of this paper after literature review.Secondly,taking Letv Group as a case,this paper introduces Letv Group,the diversification expansion strategy and the financial crisis events.According to the relevant theory,this article analyzes the financial situation of important enterprises in the group under the diversification expansion strategy,and summarizes the characteristics of its financial crisis,that is,large capital gap,financing difficulty,heavy capital cost,and low profitability and so on.Then,it deeply analyzes the internal and external factors of this financial crisis.There are 3 internal factors,including unclear profit model and aggressive expansion decision,unmatched capital scale while expansion and weak ability at liquidity control,imperfect as well as uncoordinated mechanism on risk management and imperfect corporate governance structure.There are 2 external factors,including the soaring video product prices and cautious capital market.In accordance with the above causes,combined with the financial crisis theory,this article recommends theoretical basis and 5 specific measures to deal with this financial crisis.Finally,this article summarizes the case studies above and puts forward some further suggestions and references for other enterprises to prevent the financial risk under diversification expansion;then further explains the deficiency of this research,and puts forward the future of financial crisis research prospects.