Enterprise diversification has always been a subject of research in the theoretical and business circles. Currently, there are two distinct points of view: one is that using existing resources to carry out diversified operations can avoid risks and achieve resource sharing, the result of 1 + 1> 2 is the only way for modern enterprises to develop. Another point of view is that diversification of enterprises will lead to scattered resources such as people, finance, and things, making management more difficult, reduced efficiency. In fact, diversification is a business strategy, which has no advantages or disadvantages. The key to success or failure of an enterprise's strategy is whether the external environment and internal conditions of the enterprise meet the requirements of diversified operation. If the two are the same, they will succeed. Otherwise, they will inevitably fail. So what are the factors that affect the success or failure of diversification?
1. contradiction between supply and demand and degree of market competition
The contradiction between supply and demand and the degree of competition in the market are important aspects of the enterprise's external environment, and are also the basis for enterprises to formulate and implement their business strategies.
At the beginning of the reform and opening-up, some entrepreneurs with advanced awareness implemented the diversification strategy and gradually expanded their business scope to other fields, and almost achieved success without exception. As we all know, at that time, the company's diversification was successful because it had a good external environment: first, there was a great market space in the era of shortage of Economy; second, the company's production and operation expanded its scale, increasing production capacity is at the core, and the market competition system has not yet been truly established. The vast majority of industries are weak in competition and industry barriers have not yet been formed. These have all provided opportunities for new members or new products to enter. Therefore, in this specific external environment, the success of the enterprise's diversified operation is also logical.
For today's enterprises, the external environment has undergone great changes. The shortage economy has basically ended in most fields, and production in some industries is relatively surplus. Under such circumstances, the vast majority of enterprises are engaged in profit-making or even profit-making and loss-making operations. If enterprises ignore the changes in the environment and blindly pursue diversification, they will not achieve the goal, but will bring greater risks to enterprises. In recent years, the failure rate of enterprises caused by diversified operation has greatly increased, which proves this truth. At the beginning of the listing of early listed companies, the concept of diversification was very popular. However, these enterprises lack experience in market-oriented capital operation because they have been in the planned economy for a long time. At the same time, due to the defects in the governance structure, there is often a lack of due diligence and constraints in investment decision-making, resulting in blind investment expansion of many enterprises. The result is that the front line is too long and the main business is vague, the lack of coordination between various businesses leads to enterprise failures. The famous economist stegalitz (1999) said, "a certain system may run very effectively at a certain stage of economic development, but it may become problematic at another stage ". This is undoubtedly a comment on the failure of diversified enterprise operations.
2. Position of the industry or product in its lifecycle
From the perspective of marketing, any product must go through four stages: input, growth, maturity, and recession. In different stages of the industry or product life cycle, the difficulty of enterprise operation is different, and the strategies adopted by enterprises are also different. To explore new fields, enterprises must strive to enter the industries or products in the input or growth stages to avoid entering the mature or fading stages of the industry or products, this is determined by the competitiveness, development potential, and industry barriers. Therefore, when a company enters a new industry or new product, it may not only reduce risks, but also bring greater risks.
3. The correlation between the new industry and the main business plays a key role in the success or failure of diversified operation.
Relevance can be tangible or intangible. Tangible associations are built on a common market, channel, production, technology, procurement, information, and talent. Value activities between related businesses can be shared. Intangible Association refers to the sharing of management, brand, and reputation. When enterprises establish tangible rather than intangible associations for diversified business operations, their chances of success are greater. The reason why tangible associations are successful is that the company's competitive advantages can be extended to new areas to achieve resource transfer and sharing. In the new industry, it is easy to gain a firm foothold and grow. Therefore, enterprise decision-making should be based on their own advantages, and diversification should also be based on whether new industries or products can make full use of and enhance their advantages, determine whether your existing strengths can be extended to the target industry or product. In recent years, the merger wave of western countries has started again. One of the most notable features is to focus on relevant industries and pursue business relevance as much as possible.
It has been suggested that the high degree of relevance of diversified business is not conducive to the diversification of business risks, because similar industries or products are often prosperous and damaged. Such a view has some truth, but it must be analyzed dialectically. There is a very important rule in the business world, that is, "not familiar with". Only the most familiar things have the minimum risk.
In recent years, there have been many examples of diversified operation failures in China. Shi Yuzhu, president of giant group, reflects on one of the four major mistakes of its failure, that is, the blind pursuit of diversified operation. The construction of giant buildings caused a financial crisis, almost dragging the entire company down. The strategy of Guangzhou sun god company has always been "taking vertical development as the mainstay and taking horizontal development as the supplement", that is, taking health care development as the mainstay and taking diversified development as the supplement. However, since 1993, the original strategy of the Sun God enterprise was "vertical development and horizontal development ", in the past year, 20 projects, including oil, real estate, cosmetics, computers, and hotels, were established successively in Xinjiang, Yunnan, Guangdong, and Shandong ", for large-scale acquisitions. It is understood that the Sun God transferred funds to the 20 projects amounted to 0.34 billion yuan. However, none of these projects became the new "Sun God", and all the RMB 0.34 billion was lost. When the early accumulation step into sustainable development, I think that if the profit is high, I will blindly enter what fields, and eventually the sun god will fall into the trap. By 0.159 billion, Sun God lost 2.2 yuan a year, and Hong Kong's share price fell sharply from Yuan per share in the previous year to Hong Kong dollars.
4. The root cause of diversified business operations is the core competitiveness.
the diversified business operations of enterprises must involve the core competitiveness of enterprises. Why are some of our companies able to maintain steady growth in performance while some are just a flash of cake? The key is to check whether the enterprise has core competitiveness.
most successful foreign enterprises only invest in one industry. In this industry, they gradually cultivate their core competitiveness, and then gradually consider diversified operations.
regardless of the type of diversification implemented by enterprises, it is essential to cultivate and strengthen core competitiveness. Stable and competitive main business is the main source and survival basis of enterprise profits. By maintaining and expanding the main business that enterprises are familiar with and good at, enterprises should try their best to expand their market share in order to achieve economies of scale, and strengthen their core competitiveness as the first goal. On this basis, enterprises should consider diversification. Successful enterprises first determine their main business, actively cultivate core competitiveness, and then consider diversified business operations based on this.
the context of Haier's diversified business strategy is: first, adhere to the seven-year professional refrigerator operation, and form its core competitiveness in terms of management, brand, and sales service, leader in the industry. Starting from 1992, we gradually started from a highly relevant industry based on the degree of relevance, and then started in moderately related and unrelated industries. First, we entered the same core technology (refrigeration technology), the same sales channel, and the same user type of freezers and Air-Conditioning Industry, and gradually expanded to the Black appliance and knowledge industry.
in reality, it is inappropriate for some enterprises to blindly pursue diversified operations and engage in excessive diversification. Because the longer the enterprise's front line is, the more scattered the power is, and the weaker the control is. In the Asian financial crisis, the bankruptcy of some large Korean enterprises has led to excessive diversification. In recent years, the rise of Western countries to concentrate their main business and return to the trend of main business shows enterprises' reflection on transitional diversification. The scientific idea for enterprises to carry out diversified operations is to focus on developing 2-3 projects with a certain scale and considerable strength on the basis of highlighting the core competitiveness to form a strong support for the main business, coordinated development of main business and diversified operations is the correct development idea.