Research On Asset Divestiture And Its Effect Based On Refocusing Strategy

In the stage of rapid economic growth,many companies choose diversification strategies to expand their business territories.However,excessive diversification has led to crises such as unclear core business,unreasonable allocation of resources,and tight capital supply.In order to solve the increasingly prominent problems of operation and development,many enterprises have begun to change their business strategies and seek to transform into refocusing strategies,which requires divesting non-core businesses and non-performing assets,focusing resources on core businesses and maintaining appropriate related diversification,thereby consolidating and expanding core competitive advantage.As a typical representative of the reform of state-owned enterprises and the transformation and upgrading of the manufacturing industry,AVIC Heavy Machinery has carried out asset divestitures many times in the process of refocusing.Based on the above background,this paper adopts the case study method to focus on the analysis of the motivation,process and implementation effect of asset divestiture under the refocusing strategy of AVIC,in order to provide reference for other enterprises.This paper firstly elaborates the whole process of AVIC’s asset divestiture in accordance with the background of strategic adjustment,determination of divestiture objects,evaluation of asset value,and completion of equity transfer.Secondly,it analyzes the reasons for the divestiture of AVIC’s assets from both internal and external perspectives.On the one hand,the company’s external risks and opportunities coexist: the new energy industry where the non-core business is located has many risks;the forging and hydraulic industry,where the core business is located,has broad development prospects but urgently needs to be transformed and upgraded.On the other hand,in order to cooperate with the implementation of the refocusing strategy,the company needs to divest the non-performing enterprises with insufficient growth capacity to prevent them from further damaging the company’s value.At the same time,the company needs to revitalize the non-core high-quality assets that cannot play a synergistic effect,and supplement the refocusing funds.Therefore,after careful consideration of changes in the internal and external environment,AVIC Heavy Machinery chose to implement asset divestiture for the purpose of strategic transformation.At last,this paper discusses the asset divestiture effect of AVIC Heavy Machinery based on the refocusing strategy from three aspects,which include market reaction,financial effect and non-financial effect.Although the short-term market response to the divestiture of AVIC Heavy Machinery was not stable,the solvency and profitability of the company after the divestiture were significantly improved,and the value of the company showed a rebounding trend;the divestiture also enhanced the technological innovation capability of the company by promoting R&D investment,helped enterprises to expand domestic and foreign markets by improving the brand image,and promote the orderly implementation of the refocusing strategy by closely connecting with follow-up refocusing activities.Since the divestiture of assets has effectively guaranteed the continuous and stable operation of AVIC Heavy Machinery,the company has gradually been highly recognized by the capital market in the long-term development process and the stock price has shown an overall upward trend.Compared with the separate study of the divestiture or the refocusing strategy,the innovation of this paper is that the two things are closely linked,which not only highlights the important position of divestiture in the refocusing strategy,but also systematically and deeply reveals the motivation,process and effect of asset divestiture based on specific strategy.In addition,the case selected in this paper is unique.AVIC Heavy Machinery is not only a model for state-owned enterprises to focus on the main responsibility and main business,but also a benchmark for the transformation and upgrading of high-end manufacturing enterprises.Therefore,this paper hopes to use the successful experience of the case enterprise to encourage other enterprises to rationally use asset divestiture,promote the transformation of refocusing and unleash the full potential of main business.