Research On Synergy Effects Of Diversification Strategy

In recent years, although the state's regulatory policy for the real estate industryintensified, but there are still many investments from various industries come into thereal estate industry, mainly because of the attraction of the high profit margins in thereal estate industry. So, what kinds of impact would companies' diversificationstrategy companies involved into the real estate industry have on their performance?Will it bring synergies of mutual support and promotion between the real estatebusiness and a company's main business, and contributes to the long-term developmentof the main business and overall enterprise business performance? This is a problemthat focuses on the verification of the diversification strategy coordination theory ofstrategic management in practice.Researches on the synergistic effect of diversification strategy are mainly carriedout by foreign scholars, and have formed a rich theoretical system, but the empiricalresearch of it is still rare. As the linkages between the main business of enterprises indifferent industries and the real estate business is not at the same level, while thecorrelation between the business will have a synergistic effect, so, according to thetheoretical derivation, the diversification strategy synergies brought by the correlationof different main business and real estate business are not the same.Based on the theory of strategic coordination, this paper studies the difference ofsynergistic effects among those whose main business has different extents of relativitywith real estate industry from the angle of business relativity, taking the listedcompanies that has involved in real estate business between2000and2010from theindustries of retailing, restaurants, tourism, hotel, machinery, equipment, instrumentmanufacturing as examples. The results showed that: the companies whose mainbusiness is relative to real estate business would achieve synergy effects with relateddiversification strategy into real estate industry and help their main businessdevelopment, such as retailing, restaurants, tourism and hotel; while those whose mainbusiness is not relative to real estate business, such as machinery, equipment,instrument manufacturing, will gain harm to their main business with same strategy,even though it may brings positive effects on the business performance when the realesate business takes a large proportion in a short period, it will leads to the significantdecrease of main business profit rate and damage the company's development, and comprehensively it would have negative influence on the business performance in longterm.