Research On Reverse Cycle Investment And Business Performance Of HON-FLEX Electronics

Since the reform and opening up,China’s gross economic output value and fixed asset investment have experienced rapid growth.However,both of them have cyclical fluctuations.During the economic prosperity,enterprises expand production scale and increase investment;During the economic recession,enterprises usually reduce the scale of production and investment,showing obvious pro-cyclical investment characteristics.However,Hon-Flex electronics,as a manufacturing enterprise in printed circuit boards industry,did not adopt a pro-cyclical investment strategy in its development process,but increased its investment scale during the economic downturn.Through the implementation of the diversified expansion,it has become a new representative enterprise in the domestic Printed circuit boards industry.Its business motivation,business behavior,and business performance are worth studying.This paper adopts the literature research method and case analysis method.First,it combs the relevant literature to explore the internal relationship between enterprise investment strategy and economic cycle.Then,analyze the industry background and industry characteristics,study the characteristics of the fixed asset investment of Hon-Flex Electronics,analyze and identify the fixed asset investment strategy of Hon-Flex Electronics,and find that it adopts a counter cyclical strategy,which is obviously different from the investment strategy adopted by most other enterprises in the industry in terms of investment timing.In view of the high uncertainty and investment risk of countercyclical investment,this paper further studies the motivation and implementation path of Hon-Flex Electronics to implement countercyclical investment,and analyzes the risk of countercyclical investment under different paths.Finally,this paper compares the business performance of the case company with that of other companies,and analyzes and evaluates the effect of counter cyclical investment.Through studying the counter cyclical investment behavior of Hon-Flex Electronics,the following conclusions are drawn.First,due to the demand fluctuation of the downstream industry,the upstream PCB industry experienced high economic fluctuations.Second,Hon-Flex Electronics has two different ways to implement the counter cyclical investment strategy.One is to expand the production scale of the original products and conduct market penetration during the industry recession;Second,develop new products during the industry recession,occupy emerging markets,and form new profit growth points.However,due to the uncertainty of the external environment,counter cyclical investment may increase investment risk due to inaccurate prediction and less than expected market demand.Third,the counter cyclical investment of Hon-Flex Electronics may further intensify the price competition in the industry.In the case of failing to force competitors to withdraw from the market,expanding the production scale may hurt itself due to the price war.Therefore,enterprises that implement counter cyclical investment need to guard against investment risks,improve the accuracy of market outlook prediction,and reduce losses caused by inaccurate prediction.At the same time,strengthen agile manufacturing,reduce the conversion cost of assets,and reduce the investment risk caused by inaccurate prediction.