Research On The Impact Of Hongdou Group’s Diversification On Performance

With the acceleration of economic integration,competition among enterprises is intensifying.In order to adapt to the changes and demands of the market economic environment and find new profit growth points,enterprises have tried to use diversification strategies for scale expansion.The impact of corporate diversification on business performance has also been the focus of scholars and practitioners.So,is diversification beneficial or disadvantageous for enterprises? How does the performance of enterprises that implement diversified development change? Should an enterprise diversify its development or become a nuclear company? With the above questions,this article studies the diversified management of Hongdou Group,a representative enterprise in the clothing industry.Hongdou Group’s diversification started early.By analyzing its diversification motivations and performance changes at different stages of diversification,it can help companies maintain long-term competitiveness in the future development process.The diversification of Hongdou Group has gone through three stages,namely the unrelated diversification stage,the relatively diversification stage,and the centralized operation stage.Unrelated diversified operations have enabled Hongdou Group to develop and grow rapidly;relatively diversified operations have enabled Hongdou Group to gradually determine its development priorities and divest industries with low performance,and financial performance fluctuations have been more pronounced in each year;Hongdou Group has begun to shrink its diversified operations during the centralized operation stage Scale,the formation of three major businesses with the apparel industry as the core to develop simultaneously.On the basis of combing the research of diversification theory and performance theory,divide the diversification process of Hongdou shares;then evaluate how to select different industries for production and operation at various stages based on the diversification motivation theory;and then use financial indicators to evaluate the company’s business performance After the evaluation,the performance of the main business unit is evaluated based on the gross profit margin,and the Tobin Q value and non-financial performance are used for performance evaluation.Through research,it is found that the performance of the first phase of Hongdou Group ’s diversified business declines mainly because of its large investment in industries that are less relevant to the apparel industry.Although it expanded the production scale of the enterprise,blind investment led to a decline in financial performance.During the development process,Hongdou Group gradually realized the shortcomings of non-related diversification,and adjusted it several times in the subsequent stages.The relevant indicators fluctuated in the relatively diversified stage.In the third stage,the three major core industries were identified.Only then will the gradual performance increase.Hongdou Group’s diversified operations have taken a long time,and its performance results have been twisted and twisted,which ultimately effectively improves the company’s operating performance.After researching the performance of various stages,it is found that the following three problems exist in the diversified operation of red beans: first,diversified operation exacerbates the fluctuation of corporate cash flow;second,it fails to make good use of the brand advantage of red beans in the process of diversification;The third is that many diversified industries are not refined and they lose their core competitiveness.Accordingly,the following suggestions are made: use of the risk transfer method to avoid large fluctuations in corporate profits;reasonable selection of diversified industries to enhance R & D capabilities;focus on the brand building of red beans to strengthen the market penetration of the brand;optimize the structure of diversified industries and cultivate core competition force.