The Effect of the Diversification Strategy on Performance in Taiwanese Connector Industry
Date Issued
2008
Date
2008
Author(s)
Wen, Ti-Hsin
Abstract
The reasons for an enterprise to implement diversification are to pursue synergy, to make good use of resources, to avoid risks, to become a listed company…etc. However, what kind of diversification a company should choose to make the best effect? It depends not only on the top manager’s unique vision and sharp observation, but on how an enterprise plans its diversification strategy. When planning diversification, an enterprise should evaluate external environment and internal capability, in the meantime, should get rid of the old behavior and traditional thinking, because critical mistakes would happen on details and more tricky, on hypothetical assumption. ursuing synergy as every enterprise’s perception is the biggest reason to implement diversification. Synergy is mainly divided into “synergy from resource sharing and technology transferring” and “synergy from the same operation logic”. An enterprise can use these diversification strategies to gain competitive advantages of cost decreasing and differentiation. Besides, the study also learned that connector companies bring another synergy while they execute diversification – “product synergy from mutual subvention”.he samples the research used are from 1997 to 2007. Except for the demand shift of Y2K effect around 2001, there is no big change for the structure of connector industry in these 11 years. However, the environment of connector industry changed since the second half year of 2007. Due to the raise of NT Dollar and RMB and the cost increase of material and China labor, connector companies have faced the most serious operating difficulty in the recent years. There are more than 1/3 connector listed companies have deficits. he research shows that vertical integration indeed enhances a company’s business. “Multiple” integration which executes diversification strategy after vertical integration, on the contrary, has negative result in short term. However, when the connector industry jumps out the “stable” environment that it usually has and faces the difficulties as 2008 Q1, “multiple” integration which spreads the market risk could be a slow but lasting benefit to a company’s business for long term.
Subjects
connector
diversification
EVA
multinomial logit model
panel data
Type
thesis
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