Abstract
Diversification is a strategic choice for enterprise expansion. Looking at the world, American companies in the 1960s and 1970s opened up a diversified path through large-scale mergers and acquisitions. However, by the 1980s and 1990s, American companies began to change from diversification to specialization, gradually returning to their main business, and the adjustment of this phenomenon made the performance of those companies significantly improved. Since then, how should companies abandon the choice of specialization and diversification strategy, and whether diversification is beneficial or unfavorable to corporate performance have become topics that domestic and foreign scholars are eager to study. Based on the concept, motivation and type of diversification strategy, this paper sorts out the relationship between corporate diversification strategy and corporate performance in domestic and foreign literatures. It is found that there is still no definitive answer to whether diversification strategy is beneficial to corporate performance. There are four different relationships: positive correlation, negative correlation and no significant correlation, and nonlinear correlation. The core competence of an enterprise is the fundamental support of diversified business operations and a deep-seated factor in the formulation and implementation of diversified business strategies. Research on the core competence of enterprises as a regulation or mediator of the relationship between diversification strategy and firm performance is still not perfect, and research in this field needs to be further explored.
Highlights
There are differences, electronic and chemical companies have the highest degree of diversification, petroleum and tobacco are the lowest; but there is no significant correlation between diversification strategy and economic performance
Based on the above research, there is no unified consensus on the relationship between diversification strategy and corporate performance
The higher the degree of diversification, the more unfavorable it is to the improvement of corporate performance
Summary
In the 1960s and 1970s, some large companies in the United States set off a wave of big mergers and acquisitions, committed to rapidly expanding the company and diversifying the way through mergers and acquisitions and asset restructuring. Most of these groups have crossed regions, industries and markets, developing factories around the world, expanding their businesses, and making profits from various industries. During the fourth wave of mergers and acquisitions in the United States, that is, in the 1980s and 1990s, we found that most of the company’s business restructuring priorities have changed significantly, and began to strengthen its leading business, which has divested those businesses that are not performing well or are not related to the dominant business. Whether enterprises should implement diversification strategies in the end or how to implement diversified operations can improve the performance of enterprises is of great practical significance. The Review of the Concept, Motivation and Classification of Diversification Strategies
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