The influence of diversified business strategy on enterprise performance and risk management
Ziqing Wang
Jinan University
DOI: https://doi.org/10.59429/bam.v6i4.8372
Keywords: Diversification Strategy; Enterprise Performance; Risk Management
Abstract
This paper deeply discusses the positive and negative impact of diversification strategy on enterprise performance. By entering different markets and industries, diversification strategy rationally allocate enterprise resources in multiple business fields, so as to realize resource integration. This integration not only improves the efficiency of the enterprise, reduces the waste of resources, but also promotes the synergy between different businesses, and creates more sources of profit for the enterprise. In addition, diversification can effectively disperse operational risks. When a company encounters market volatility or an industry downturn in one business area, it can better balance its overall performance through revenue and growth in other areas. This diversification of income sources provides a solid guarantee for the financial stability of enterprises and enhances their ability to resist risks. Especially in the global market environment, the changing trend of different markets is different, and income diversification has become an effective means for enterprises to deal with risks. However, diversification can also bring a series of challenges to enterprises. The first is the financial pressure. Diversification usually requires large-scale capital investment, and the new business may not bring significant profits in the short term, thus leading to the increase of financial pressure on enterprises. In addition, cross-industry or cross-market expansion may be accompanied by market risks, especially when enterprises enter unfamiliar fields, they may encounter differences in consumer demand, legal and regulatory restrictions, and pressure from competitors, leading to increased market risks. Moreover, diversification may also lead to an increase in management complexity. With the expansion of the business, the organizational structure of the enterprise becomes larger, the decision-making process and communication costs rise, and the decentralization of management resources may lead to less attention to the core business, and even affect the overall operational efficiency
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