Research On The Financial Dilemma Of Diversified Development Of Guirenniao Company

In recent years,China’s economy has developed rapidly,and many companies have achieved success by using diversified development strategies.However,diversified development is not without risks,and there are countless companies that implement diversified development strategies that lead to financial difficulties.Based on the basic theory of the financial distress of the diversified development strategy,this paper introduces the motives,development process and the outbreak process of the financial crisis of Guirenniao Company through the case study method.And the current financial predicament,the reasons for the financial crisis of Guirenniao Company are analyzed from the external and internal aspects:(1)The external reasons are mainly affected by the cyclical fluctuations of the macro economy,adverse changes in the market environment,and increasing industry competition.Intense,the transformation of sportswear enterprises under the new consumption model is difficult,and the cost of clothing enterprises has increased significantly due to factors such as the disappearance of demographic dividends and rising raw material prices;(2)The internal reasons are mainly that the diversified expansion of Guirenniao Company is too radical,and in the development process Neglecting the main business,the core products lose their competitiveness in the market,resulting in a continuous decline in net profit.The serious insufficiency of cash flow management and inadequate risk management are also the reasons for the failure of its diversified development.In view of the above situation,this paper puts forward four suggestions for Guirenniao to deal with financial difficulties from four aspects: strategic decision-making,brand development,cash management and risk management:(1)When implementing a diversified development strategy,it should be careful to choose the expansion industry,to prevent financial distress due to blindly choosing unrelated diversification;(2)Returning to the development of the main business brand,segmenting the market,focusing on the research and development and design of core products,and strengthening brand culture construction and publicity;(3)Strengthening Cash management and control,improve the utilization rate of funds,and avoid more serious financial difficulties due to insufficient cash flow;(4)Improve risk management capabilities,set up a separate risk management department,establish a financial crisis early warning mechanism,and strengthen prior prevention work.It is hoped that the relevant research in this article can help Guirenniao Company get out of financial difficulties as soon as possible,and also hope that other enterprises can learn from this when they develop in diversification,and do a good job in preventing and responding to financial difficulties.