Financial Evaluation Of Suning's Diversification Strategy

With the exit of favorable policies,the growth rate of operating income of the household appliance industry has slowed down noticeably.Leasing and labor costs continue to increase,the Internet is rapidly developing,e-commerce is eroding the share of the physical retail industry,and consumers' shopping forms and needs have undergone tremendous changes.Suning is facing tremendous development pressure.Based on the purpose of diversifying risks and making full use of resources,Suning chose a diversified development strategy.Everything has its advantages and disadvantages.Once a company cannot apply its diversification strategy,the original industrial development will be weakened,funds will be dispersed,and market risks will increase.A wrong project may cause the company to fall into the abyss.Based on this research background,this paper evaluates the financial effects of Suning's diversification strategy.This paper first gives an overview of the relevant literature and elaborates on the diversification strategy,financial capability analysis,economic value added,and related theories of the Boston matrix.Suning,a representative of the “entity + e-commerce” retail industry,as a case study,expounded its diversified development process,analyzed Suning's basic financial situation and financial capabilities,and analyzed Suning's financial capabilities with retail giant Alibaba.The entity + e-commerce type retail enterprise Gome compares.After that,Suning's economic value added in the past 12 years was calculated,and Suning's diversification strategy was divided into correlation and irrelevance.The Boston matrix was used to analyze the financial effects of its diversified development strategy.The results show that Suning's diversification strategy is not very successful.After adopting the diversification strategy,Suning has improved its operational capability;its profitability has been declining,and it has rebounded in 2017;its short-term solvency and development capacity are in a state of volatility,and the overall level is at a general level;after Suning's online sales of electrical appliances,It is still creating value for shareholders.Since 2013,it has increased its diversified business.Suning has damaged shareholder value.However,the diversification strategy in 2017 has achieved remarkable results and has begun to create value for shareholders.To this end,online business should integrate the resources of its various channels and pursue the improvement of the overall income of the enterprise;the home ownership should be invested according to the growth of the business;the payment business should utilize the existing advantages and resources of the group in the financial sector.Expand business scope and increase market share;logistics to reduce operating costs through Suning Tesco and offline sales and high-quality services,and integrate daily express and its own resources to form Suning's unique logistics resources and increase market share.