Research On Financial Crisis From The Perspective Of Diversified Expansion

In recent years,due to the macroeconomic downturn and the intensification of competition in the industry,many companies have adopted diversification strategies to enhance their overall market competitiveness.As the first IPO stock in China’s retail industry,Suning Tesco once ranked first in the retail industry with a high brand value of RMB 296.815 billion,and there was even an old saying in the industry that half of the history of retailing in China depends on Suning.Such a legendary company is now in the midst of a storm due to the failure of its diversified operations.This paper takes Suning as a typical case of failed diversification expansion,and starts from the perspective of the impact of diversification expansion on corporate financial crisis.The research background and significance of this paper are firstly introduced.Then,through a review of Chinese and English literature,the current status and views of scholars at home and abroad on diversification strategy,financial crisis and the correlation between the two are sorted out and summarized,and the relevant theoretical foundations required for the case study are explained.This is followed by a brief introduction to Suning,a detailed description of the implementation process of Suning’s diversification and financial crisis,and an analysis of the effects of Suning’s diversification from a financial perspective.Finally,the causes of Suning’s financial crisis are identified: firstly,Suning’s diversification and expansion was too blind;secondly,Suning’s diversification process was too fast,resulting in a mismatch between capital and demand and excessive debt,which greatly increased the financial risk of the company;thirdly,Suning’s investment decisions were wrong,and the company lost its solvency due to the loss of investment projects year after year.Finally,according to the current situation of Suning,corresponding strategies are proposed.In response to the failure of Suning Tesco’s diversified expansion,this paper analyses and finds that Suning Tesco has been facing latent financial risks since it started its diversified expansion path and continued to intensify,but the company failed to take preventive and control measures against the risks in a timely manner and continued its aggressive diversified expansion activities until 2021,when Suning Tesco’s financial crisis fully broke out and the Shenzhen Stock Exchange imposed "Other Risk Warning" by the Shenzhen Stock Exchange in 2021,and the stock name was changed to "ST Tesco"(referred to as Suning Tesco or Suning in the case description below).Through the case of Suning’s failed diversification,this article finds that diversification can lead to a deep financial crisis.