· Dr Marizah Minhat, for her continuous support, supervision and guidance in the researching, writing and compilation of this dissertation.

· All participants for taking part in my interviews, giving their time to answer my questions and contributing to this dissertation.

· My family and friends for supporting and encouraging me throughout the whole process.

Cheers

However, I still should modefy my dissertation in a few days and finish the Reference and Appendix.

So keep working hard!

Cheers

Everday when I read my compished part of my dissertation, I always can find sone place to modefy. If an English peacker can felp me that will be great.

I still worked on my conclusion part wish to complete soon.

Anyway I am glad with my dissertation. Keep working!

Regards

Hopefully, my supervisor said it is not too late to change and improve my Blog.

Recently, I have almost finished my dissertation and keened on modefing and adding the abstract and conclusion part of my dissertation. And I know the conclusion part should reflevt the whole work i did during writing my dissertation. That is not a simple work but i will try my best.

Happy with my dissertation.

Cheers

Here attached my interviews questions.

Interview

Interview with the Haier regional manager –Zhang Yuhe

Interview with the Haier product R&D department designer—Wang Feng

 I’m a 4th year student of Edinburgh Napier University where I’m currently studying Business Management with Financial Services. I’m undertaking my dissertation this year, which tackles the topic “Research on SWOT analysis method of product diversification strategy”. The purpose of this interview is to help me gather data for analysis of Haier product diversification strategy application and implement. Please cooperate with me and answer the questions below in your opinions. Thank you so much for your time.

1. Whether Haier has applied product diversification strategy in the development of enterprise?
2. When did Haier apply the product diversification strategy?
3. How did Haier conduct the product diversification strategy? The process?
4. What success has Haier get by using product diversification strategy? The profits? The market expanding? Attract more target customers?
5. Are there any weaknesses Haier has met in the process of product diversification strategy application?
6. What opportunities Haier could grasp in the diversification development in the future?
7. What threats or risks Haier got in the product diversification strategy development process?
8. What improvements Haier could do in the future diversification development?
9. What experience can be shared with other companies in the process od product diversification strategy application? The advices?

10. How to manage and implement product diversification strategy in the business management?

  I would highly appreciate your participation as your perception and knowledge can provide my research with very valuable insights. Thank you.

3 Methodology

3.1 Introduction

The purpose of this chapter is to analyze and explain the importance of business research and data collection, the different types of data collection methods available and their validity and reliability. It will also describe the method used for this dissertation and the limitations for this method during collection and analysis.

Overview over research methods

There are two kinds of methods for dissertation research—primary research and secondary research. Primary resources are original material, which data need to be collected oneself in the first time and information has not been interpreted before (Saunders et al, 2003). Secondary resources are the data has been discovered and analyzed by former specialists’ researches. (Saunders et al, 2003).Both of them have their own advantages and disadvantages.

Primary research can customize surveys as questionnaires according to the current dissertation needs and concentrate on a specific research topic. So that primary research can save the expense on searching and analyzing secondary sources. The data gained is therefore unique and more relevant to the aims of the research, as well as more recent and suitable than secondary sources. There are also some disadvantages to primary research. Sometimes the rate of return is not high enough, such as interviews and questionnaires. In conducting interviews for a survey, for example, people have to spend a considerable amount of time and money in order to get sufficient and relevant data. Moreover, it is hard to find the interview would like to answer what kinds of questions and whether they are totally honest in giving answers to the questions(Cooper and Hedges, 1994).

It happens that there is a similar case to Secondary research with advantages and disadvantages in a coincidence. The gathering of secondary sources might not be as time-consuming as primary research. This is in particular true for the majority of recent journal articles that are not only available at university libraries, but have also been digitalized for online access. And the use of secondary data has allowed researchers access to valuable information for little or no cost to acquire. Therefore, this information is much less expensive then if the researchers had to carry out the research themselves (Saunders et al, 2003). Another advantage for secondary research is that it may show difficulties in conducting primary research. In many cases, the originators of secondary research include details of how the information was collected. This may include information detailing the procedures used in data collection and difficulties encountered in conducting the primary research (Stewart and Kamins, 1993). Therefore, the detailed difficulties may persuade the researcher to decide that the potential information obtained is not worth the potential difficulties in conducting the research. On the contrary it is obvious that secondary research has some disadvantages as well. The originators of the primary research are largely self-governed and controlled by the marketer. Therefore, the secondary research used must be scrutinized closely since the origins of the information may be questionable (Saunders et al, 2003). Moreover, the researcher needs to take sufficient steps to critically evaluate the validity and reliability of the information provided. And also, it is not specific to researcher’s needs. In many cases, secondary data is not presented in a form that exactly meets the researcher’s needs (Stewart and Kamins, 1993). Therefore, the researcher needs to rely on secondary data that is presented and classified in a way that is similar to their needs. In addition, sometimes secondary can not offer incomplete information. The researcher may not get the full version of the research to gain the full value of the study (Stewart and Kamins, 1993). This is because many research suppliers offer free portions of their research and then charge expensive fees for their full reports. Remarkably, secondary some data are not timely. When using secondary research, one must exercise caution when using dated information from the past. With companies competing in fast changing industries, an out-of-date research reports many have little or no relevance to the current market situation(Saunders et al, 2003).

In a conclusion, there is no perfect and changeless research method, both primary and secondary research have own limitations. So the choice of research method depends on the various contexts and specific circumstances.

3.2 Adopted research methods

Primary and secondary data was collected for my research. The primary data will be collected by using interviews with manager and investigator of product development department in Haier group. Firstly, I will refer to some reasonable and diversification relative questions and contents about interviews. Secondly, make phone and video interviews with the company manager and an investigator of product development department under the help of my professors who work in China Agricultural University and relatives in China. They will arrange the interviews with interviewees. Also it will be included a section at the end to ask the interviewees if they feel I should add anything to talk about. After interviews I will record and write the copy of the conversations. And then transcribe them by myself and “Express Scribe” software (a transcribing software). The purpose of there interviews are to find out the diversification operation of Haier group, such as its strategy, target, process and current situation. Through analysis and discussion, tend to conclude the strengths, weaknesses, opportunities and threats of Haier diversification strategy application. Then according to this case study, propose the personal ideas of how to develop product diversification strategy in Chinese enterprises. The secondary data such as the background of the enterprises I got them from public documents such as reports, company websites and the internet literature. From these sources I can get more accurate data and know the research of the enterprises from the scholars. It can make the dissertation based on the scholars’ powerful research.

And also I was helped by a professor of China Agricultural University to get some detail information. He is a scholar of Haier group Yantai branch enterprise management consultant. I got some targeted recommendations from him for the research of this enterprise.

3.3 Limitation

The research methods I choose will have some limitations to some extent. The most noticeable issue is that my limited knowledge, investigation and research about the cases of diversifying strategy in enterprises are limited. I will do primary research in Chinese, not English. So I should translate them. That may be another limitation. And also, I should consider the limitation of whether the primary data is precise and relevant to my dissertation or not by conducting interviews on phones and video interviews through the Internet and whether the secondary data is up to date or not for me to refer to in quoting to my dissertation.

Saunders et al (2003) suggest that telephone interviews although offering certain advantages such as speed, access and lower costs, can present limitations. Conducting qualitative interviews over the telephone may lead to issues of (reduced) reliability, where participants are less willing to engage in exploratory discussion (Saunders et al, 2003). There is also the issue of recording the data collected via telephone and video interviews. Another limitation encountered when conducting primary research for this dissertation in the form of interviews was the reliability and relevance of the answers given to questions asked. One aspect of this problem was the lack of detailed subject area, such as the overseas market product diversification strategy application survey. Although their answers did provide broader knowledge of the area, problems of their individual knowledge on certain questions meant that not enough information was given and in some cases.

The comparison of advantages and disadvantages of telephone and video interview can be seen from these aspects:

Advantages of telephone and video interviewing

Disadvantages of in-person interviewing

More accurate responses owing to contextual naturalness, Greater likelihood of self-generated answers, Symmetrical distribution of interactive power, Greater effectiveness with complex issues, Better for all the awe hearing-impaired respondents, More thoughtful responses, More accurate results owing to lower interviewer workload, Better response rates, Better for marginalised respondents, Better for research involving sensitive questions.

Weighing the advantages and disadvantages, I chose the telephone and video interview at last from the consideration of efficiency and cost reduction. In-person interviews take longer than those done by telephone, no substantive elapsed time difference was found two in the two modes in this study. However, telephone interviewing do not have problems of spaces.

Reference

Saunders, M., Lewis, P., Thornhill, A., (2003). “Research Methods for Business

Students”, Third Edition, Prentice Hall.

David W. Stewart, Michael A. Kamins, Secondary Research Information Sources and Methods,secondary edition,1993,SAGE publications

Harris Cooper, Larry V. Hedges, The Handbook of Research Synthesis,1994, USA

Cheers

2. Literature Review

2.1Background: The research situation at home and abroad

The research which Rumelt (1974) did is of profound for diversification strategy (Anil M. and Narendar V.,1998 ). It was the first time to separate related diversification with unrelated diversification, and then made the conclusion that the related diversification and leading diversification strategy could achieve the best enterprise economic performance. However, the worst role played in economic performance was unrelated diversification and vertical integration diversification. Lang and Stulz (1994) analyzed the influence of diversification to Tobin – Q value, resulted in Tobin-Q value was negatively interrelated with diversity (Lang. L and Stulz. R, 1994). Berger and Ofek (1995) through structuring the relative value index found that diversification could reduce the 13% ~ 15% corporate value( Berger. P and Ofek. E, 1995). One of the Chinese scholars Liu Li (1997), concluded that there is no correlativity between enterprise diversification degree and enterprise management efficiency with the ratio of asset-liability (Liu.L,1997). And Li Jing (2002), did the empirical studies about 105 Chinese listed companies in 1997, had found that on the whole, the diversification operation level is negatively related to the operation performance of Chinese enterprises(Li.J,2002).

According to statistics, in 1970, 94% of the top 500 industrial companies engaged in the diversification operation in United States of America. Among the Britain’s biggest 100 enterprises there is only l % enterprises engaged in a single industry production. In Germany, France, Italy this kind of proportion are 22%, 16%, 10% respectively. Modern enterprise development and extension strategy can only be developed by diversification strategy. Nowadays, large-scale diversified enterprises in the world always operate their business as a form of enterprise association. For example, the headquarters control the worldwide branches by holding their stocks and forming a kind of global enterprises group. At present many large and medium-sized enterprises even small-sized enterprises adopt diversification strategy in China which is quite similar to the situation of America in 1970s. Currently, most enterprises in developed country, especially almost all of the large multinationals have adopted this operation management strategy. Since the early of 1980s, Chinese companies started to develop the diversification strategy, but compared with the ones in developed countries, they still need a long way to improve.

2.2Basic theories

2.2.1 The developing process of product diversification strategy thought

Whether to choose the way of diversification or specialization for the development of enterprises is always one of the most topical issues in the operation strategy studies. The concept of diversification was first put forward by H.I. Ann Soff in the last century. It referred a business strategy that a company operates several different businesses in related or unrelated industries out of the scope of leading industry, and it is a kind of developing strategy opposite to the specialized business strategy. Following Ann Soff’s enlightenmnet thought of diversification in 1957, E.T. Penrose coming from Johns Hopkins University analyzed the diversification strategy in his monograph “Enterprise Growth Theory ” in 1959. A.D. Chandler pointed out the decentralized mode of divisional system organization in “Strategic and Organization Structure” (1962). In 1962, M. Gort the gothic (M), in the “American industrial diversification and integration” refers to that diversity is a single enterprise service increased market heterogeneity. In other words, diversification includes not only the enterprise product diversification but also the market diversification, which means studies came to influence the development of the enterprise external environment from internal one. Generally speaking, 1950s and 1960s were the beginning of the diversification researches.

In 1974, Rumelt put the essence of diversification extending into a new field, which needs requirement of new abilities development or existing abilities enhancement. A new kind of business activities have all kinds of relationships with the existing activities may, but it is necessary to grasp different production technologies, different marketing concept and methods and new investment decision-making, planning and control measures. L.W. Riley studied American Fortune 500 stronger enterprise in 1967, described the differences of diversification strategy. On the basis of Riley’s research, R.E. Hoskisson and M.A. Hitt put forward the measurement method of diversification strategy in 1990. It is observed that this period is the stage of diversification development when people conduct diversification measurement and evaluation from the various performances of existing enterprises.

Recently, there appears to be a trend of reconsideration the correlation in the research field of diversification strategy (Bergh, 2001). Potter used five kinds of competitive strength models, corporate status and the model of value chain analysis to analyze the diversification strategy and proposed the strategy named “Target Focus Strategy”(Porter, 1997). Barney proposed that the diversification development direction must be related to resources (Barney, 1991). Markides come up with the refocusing concept in the book ”Diversification, Refocusing and Economic performance”(Markides, 1995). Chrisman Chua and Sharma had a discussion about the diversification problems under the integration perspective. Due to this stage represents the rational thinking of business operation, therefore this period be defined as the reflection phase of diversification.

These are the key development veins of diversification strategy management thoughts.

2.2.2 The definition of diversification strategy

Diversification strategy is first referred by the famous product and market specialist Ann SuoFu in the 1950s, mainly aimed at product type and quantity in business operation. He proposed that this strategy is appropriate for the enterprise try to create lasting competitive benefits through business combination, selection and management of product development and market development in many other related and related fields. Diversification strategy refers to a sort of business strategy or growth behavior when the business scope of enterprise beyond its original business field while operating two or more products or services.

Analysis of diversification strategy

Diversification refers to the entry into some chain of operation. It may be related to some distinctive competence or asset of the core business itself (also called concentric diversification); otherwise, it is referred to as unrelated to conglomerate diversification, In related diversification, there is evident potencial synergy between the new business and the core one, based on a common facility, asset, channel, skill, even opportunity. Porter (1985:323-4) makes the distinction here between “intangible” and “tangible” relatedness. The former is based on some functional or managerial skill considered common across the businesses, as in a Philip Morrisusing its marketing capabilities in Kraft. The latter refers to business that actually “share activities in the value chain”, for example, different products sold by the same sales force. It should be emphasized here that no matter what its basis, every related diversification is also fundamentally an un related one, as many diversifying organizations have discovered to their regret, That is, no matter what is common between two different businesses, many other things are not ( Henry. M, Joseph. L, etc,2003 ).

2.2.3The Classification of diversification strategy

Diversification strategy is a kind of development strategy that enterprises operate two or more than two different types of products or services with different basic economic use. Diversification strategy is a relative opposite business management strategy with specialization strategy, and its content includes product diversification, market diversification, investment diversification and capital diversification (Richard P. R., 1982).

The so-called product diversification refers to the business of new products spans a variety of industries but not necessarily related to, and mostly producing the series of products. Market diversification refers to the company’s products sold in multiple markets, including national and international markets, even the global market. Investment diversification is that the investments of enterprises not only centralize on one region, but also disperse into many regions even everywhere in the world. Capital diversification is the different sources and composition forms of enterprise capital including physical capital and intangible assets such as securities, stock, intellectual property, trademarks, corporate reputation and so on (Zhao,H., Luo, Y., 2002).

In a general sense of diversification is the product diversification. Diversification and product differentiation are different concepts. The so-called product differentiation refers to the segmentation of same market, but in essence is the same kind of product. But the product diversification strategy is the same company’s products into the heterogeneity market and the increase of new products and entering new markets happens almost at the same time.

In my dissertation I will research on the product diversification.

2.3 SWOT analysis of product diversification strategy

2.3.1 Stenths

2.3.1.1 The function of diversification

According to the circumstances of large scale business span and operation, abundant funds, strong risks distribution ability, powerful market development ability and better adaptability, the product diversification strategy emerges. From the various implement in enterprises of diversification management strategy, mainly the function of diversification put forward to solve the following problems. To disperse risks. Enterprises often expand to other industries in the shape of sideline occupation from the centre of their own industry. To utilize resources sufficiently in the process of business management. Develop towards related and unrelated fields from technology and market (Peter, G. K., Marc, R. S., 1997).

2.3.1.2 The reason of diversification adoption

Diversification strategy is adopted by many enterprises, because the following points. First, the diversification can distribute risks. Secondly, diversification strategy can make full use of existing resources. Also diversification strategy can create more profits with the new market exploration. So when an enterprise tries to pursue maximum profit, product diversification strategy will become a natural and prior selection.

2.3.1.3 Economic Advantages of diversification

The economic Advantages of product diversification strategy application can be concluded as three points. Firstly, encourage the efficient allocation of capital. Secondly, diversified configuration helps to train general managers. Thirdly, spread risks across different markets (Peter, G. K., Marc, R. S., 1997).

2.3.2 Weaknesses

2.3.2.1The disadvantage of diversification

Throughout the world, today many big companies want to take advantages of diversified management mode to resist the risks in economic field and realize the continuous growth and sustainable development. But the success of enterprise diversification operation comes from the premise of strong and powerful core competitiveness, having a good operation performance as well as stable foundation core products, having the supporter from special strength as a strong backup.  On this basis, the management layer should start from the enterprise general development strategy, under the foundation of sufficient demonstration of external and internal conditions. While according to the needs of future development, enter into a new industry without the influence of public opinions which refer that diversification will bring extra income in all circumstances (Richard P. R., 1988).

Generally speaking, when an enterprise tends to enter into a new industry it must be restricted by many factors, such as the knowledge and experience of management level is finite, the useful information and the capital as well as capable employees of enterprise are limited, and so on. Without the consideration of these factors, it is ineluctable to cause improper selection of markets, illicit business operation and out of effective control of business implement. These results in the diversification not only can not be helpful with the profits, but also increase the operation risks. So if an enterprise decides to enter the new field, it is necessary to forecast systematically, make a scientific decision and resist diversification temptation. Otherwise, it is likely to make the enterprise having a shortage of bright future, and eventually get the enterprise retrogress and in some trouble.

It is not difficult to find the disadvantages of diversification strategy are mainly embodied in the following aspects by analyzing many failure enterprises diversification cases.

Firstly, diversification makes the enterprise difficult to adapt to environmental changes rapidly. In the market economic tide, any enterprise is in the moving business environment and the dynamic environment is not independent on man’s will. So it is easier to adapt to changes in the environment, adjust operation strategy and investment scheme for enterprise with individual product operation than large enterprise group. A diversified business enterprise with involvement of multiple and different products and field wants to adapt itself splendidly to the national policy, the needs of the science and technology development, economic cycle changes and client demands updating is not as simple as imagination.

Secondly, Diversification can increase the management cost. Chinese enterprises operations have their own characteristics, generally speaking is thinking highly of scale not integration and preferring development speed than development quality. These characteristics bring many management problems for diversification operation groups. Such as huge management institutions tend to have more severe bureaucratism and formalism phenomena, which in some extent restrict the enterprise spirit of innovation and causing a waste of resources. So diversified management will increase the management cost.

Thirdly, diversification strategy interferes the enterprises focusing on improving the core competitive power. Now some of the worldwide big groups and big enterprises are supportive by their main product development, such as Coca-Cola company has its own core product with a clear industry structure. Its core competitiveness represents on its technology and service concept. Conversely, if a company expands blindly on the scope of business and investment fields, even takes part in some high technology enterprise with greater risks, it is likely that the business of this kind of enterprise will result in business crisis in the end.

For example, in international company—IU, which is a listed company with hundreds of millions of dollars assets in the New York stock exchange. The managers of this company try to obtain sustainable increasing income through mergers and acquisitions ocean transportation, gold mining businesses to realize diversification operation strategy and hope to achieve the maximization value goal. But things went athwart that the investors could not notice the real market positioning of IU company, so they did not continue supporting it, which caused share prices fell rapidly at that time. Finally this company could only adopt company division strategy to reverse the passive situation.

Lastly, diversification can lead enterprise funds to scatter. According to statistics, by the end of 2000, there were 200 companies proclaimed to enter into network domain and 20 listed companies announced to access the biological pharmaceutical industry. To some extent it can be seen clearly that there exists speculative and blindness when companies expand their business fields. Because these emerging industry needs not only management technology, but also more a lot of money requirement, but the large use of funds need to pay huge cost.

So the enterprise wants to play the best whole advantage, it is necessary to strengthen the macro-control of capital and evade credit risk to the fullest extent. When the enterprise be confident of its main business operation and be optimistic of its market development, it can concentrate on developing one industry well after strong position establishment then gradually extending towards to other industries.

Remarkably, there is no universally suitable criteria company management mode, so every enterprise should certain own development direction according to development strategy and status quo, it will expand scale. Try to avoid risks while appropriately expanding dimensions and cultivating the core products so that the enterprise can be bigger and stronger.

2.3.3 Opportunities

Enterprise diversification should focus on the following issues. Firstly, respect the objective laws of enterprise growth and the scientific choice of specific diversification pattern. Secondly, make the reasonable choice of investment and business scope. Thirdly, exert the self advantages of enterprises sufficiently (Ansoff,H.I., 1957).

In order to ensure profit diversification strategy, there are two opportunities for companies to grasp: internal collaborative matching cost is the lowest and external market growth rate is relatively fastest.

Collaborative value matching is the root of internal recessive value decline. All though the differences exist definitely, how to integrate aspects from different lays of value is not difficult to complete. At least, it can alleviate the current pressure of the hidden costs inside. Of course, this is just one of many links, so until all the links are coordinated together, and then lead with the enterprise value so that the enterprise strength direction can be agreeable and the whole operation can be smoothly executed.

In terms of the external point, products band and value coverage can be conducted by its enterprise brand, also among the products brand should integrate the values and every product exactly represents the specific aspect to strengthen this value and satisfy consumers’ needs. In fact there is one thing to mention, it can not be advocated that an enterprise focus on too many things at one time, many braches means some of them will not be under the consideration of profit strategy. Like a person, if he knows about the destination, he will not always turns left and right which is a relatively distant road. Thus, if an enterprise unifies its values and goals, it can just research and develop deep things revolved around one centre. Many Chinese enterprises do not have the clear strategic decisions and its index so that wasting some money by doing unprofitable things. All in all conduct coordination from the value consideration is the only practical direction.

2.3.4 Threats

2.3.4.1Threats and risks researches

In the research of the relationship between diversification strategy and enterprise risks, Montgomery, Singh (Montgomery, C．A．, Harbir, S., 1984), Lubatkin, ONeil (Lubatkin, M．& ONeil, H．,1987) and Barton (Barton, S．L.,1988)think, compared with other diversification business type and single business type, unrelated diversification strategy has relatively higher system risks, lower market influence and higher debt ratio.

In the process of studying the relationship between diversification strategy and enterprise risks, Lubatkin and Chatterje (Lubatkin, M．& Chatterjee, S．．,1994)examined the accuracy of Capital Asset Pricing Theory in the diversification field, then found out that the diversification strategy and risks of enterprises do not have linear relationship but the u-shaped curve relationship. When the enterprise diversification level is at medium diversification situation, there will be less risks. Therefore, the two scholars suggested that in order to reduce risks enterprises should develop related diversification, especially related intensive diversification.

But Amit and Livnat (Amit, R．& Livnat J．,1988)published an article about related diversification strategy and risk-income balance. They found that related diversification strategy was usually high yield and high risks. While low income and low risks often were the features of unrelated diversification enterprises. They also argued that the conclusion can not determine which kind of diversification strategy is better, but it is certainly that it is impossible to increase profits while reducing risks.

In addition, Chang and Thomas (Chang, Y．& Thomas H．, 1989)researched the influence of diversification strategy to American diversified enterprises’ risks and profits. Research result showed that the risks and benefits were more relevant to the scale and market influence of enterprises. Earnings will affect the choice of enterprise diversification strategy, but diversification strategy will not necessarily bring high yields for enterprises. Compared with related diversification, unrelated diversification may have lower risks to some extent. In addition, benefits and risks had a u-shaped curve relationship, namely the benefits and risks were square positive correlation.

2.3.4.2 The risks of diversification strategy

There are two main risks of diversification strategy development and application—dominant risks and implicit risks. Dominant risks include the industry entrance risk, marketing channel rebuilding risk and financial risk. While the implicit risks include time grasping risk, research and development risk, quitting risk and brand image risk. These kinds of risks coming from management, finance, human resources, enterprise culture, enterprise brand image, marketing channels and research and development point out the influence of diversified development of enterprise. The industry entrance risk, time grasping risk, quitting risk and so on will even endanger the survival and development of enterprises (Amit, R. & Schoemaker, P. J., 1993).

2.4 Some examples of enterprises product diversification application

Reasonable diversification strategy should be applied after the enterprise has developed its own industry to a strong and stable extent, enter into a new industry based on the original core competencies. And obtain a firm foothold in this new industry, gradually achieved the leading position in the industry to develop new core competencies, and then based on the new core competence enter into other new areas, forming a benign cycle of expansion mode. The U.S. General Electric Company (GE), involves a very wide scope of its diversity, many enterprises currently in the process of diversification development would like to be aimed at GE as an example. In addition, the diversified structure of GE forms gradually. The GE ex-CEO—Welch Jack referred a famous point of view about product diversification selection: If involving in a new industry, the company must get the top or second place in this industry, otherwise quit from this field.

When companies engage in diversified operation into related fields, they always create a new kind of product, or master a new kind of core technology, or apply a new kind of business operation model.

Therefore, to accomplish the successful product diversification strategy implement, firstly there must have the foundation of technological innovation. For example, in the 1980s because the Japanese companies concentrate on developing the technologies of video recorder market leading to the American companies which have only the basic technologies of video recorder lost a large scope of VCR market. Another example is Procter & Gamble (P&G)Company, it is in pursuit of the perfect spirit of innovation to develop such as Head & Shoulders, Ariel, Crest and so on these world wide famous brands. Secondly, management innovation is another necessary one. Through the product diversification strategy into a new competitive field is also a challenge of administration abilities. Chinese famous company—Haier, its success of diversification not only owes to technological innovation but also benefits from management innovation. In other words, without the management theory of market development first and then establishing the factories and the creativity and flexible management principles, Haier’s product diversification strategy can not be successfully implemented.

2.5 The misunderstanding of product diversification strategy application in Chinese enterprises:

In recent years, many Chinese enterprises try to achieve the operation risks reduction goal and make sustainable development by pursuit of the diversification management mode. However, in fact not proper diversification strategy application will cause the enterprise have the financial crises even imperil into the bankruptcy problem.

 Most Chinese large-scale enterprises operate mainly in a way of diversification management. For instance, the richest Chinese entrepreneur Li Jiacheng operating Cheung Kong Holdings (CKH) business, which relates to port, real estate, retail, communications and other industries. When Chinese companies develop to a certain degree, it is in common that most of them will step into multiple business fields. However, compared with the business mode which western enterprises diversification management used, Chinese companies’ diversification shows the obvious characteristics of greed and copy blindly. Such as too large business span lead to the coordination and consistency of different businesses are too weak, even some companies are addicted to diversification to the dead end. The Giant Group in China grows and thrives relying on printed software but collapses because of real estate. This is the typical blind diversification strategy application.

The reasons why this phenomenon comes into being can be attributed to imprecise management control, not regular investment management and irrational project management of internal business units. This sort of lack of rational diversification strategy understanding, must cause the increasing difficulties of management. Meanwhile, the enterprise headquarter’ abilities of operation decision making based on market competition prospects is weaker, the more uncertainty will emerge by the expansion of diversification in the process of headquarters making decisions. So, eventually the company will completely lose its control ability for every business level, and if the business is out of control the company couldn’t recover its circulating fund timely, that means such company will only be left the fate of collapse.

Remarkably, Chinese enterprise conduct business control is on the basis of people control. No matter the family business establish the combination through the family relationship or the public enterprises form their business control through the cronies, the highest policy-making superiors manage and dominate the subordinates all based on the emotions of the person in charge. If the western enterprises business management mainly depend on system principle management, then the Chinese enterprises’ management structure is a comprehensive use with emotion consideration. But in some cases, once occurs the situation that emotion consideration comes first in the process of business management, it will surely reduce the effectiveness of enterprise management rules implement and damage the authority of enterprise management regulations.

Due to the emotion existence in management structure, the superiors will transfer the assurance of specific operation business into the grasp of people. As the saying goes, good things were cooked. But sometimes the unnecessary input will cost. Thus, the decision layer can not totally understand and master the scope of the specific business fields and form a diversification development mode with great risks.

Dissertation Outline (10%)
Name: XI WANG
Matriculation No: 09013250
1. Title
Research on SWOT analysis method of product diversification strategy
2. Introduction
In the contemporary world, diversification is not only a strategic choice for
enterprises, but also a hot and controversial topic in strategic management research.
It has become one of the dominant strategies in some enterprises. Meanwhile, there
are two completely different points of view about diversification strategy. One is that
diversification can reduce risks, realize resource sharing potential and develop a
modern as well as competitive enterprise. Another one is that diversification can
disperse human resources, finance and materials. In addition, it can increase
management difficulties and reduce the efficiency of corporate operation relatively.
In the 1960s and 1970s, there was a diversification upsurge in some European
enterprises. Then, in the beginning of 1980s many enterprises which had applied
diversification had to quit from the unrelated business field. (David, 1998) In the early
1990s, many Chinese enterprises applied diversification strategy leading to arise a
boom of diversification in China. However, the effects are not optimistic. Most
diversified enterprises have appeared different degrees of low benefits of assets,
deterioration of capital structure and operation conditions, and even lost the market
positions. (Yu Yan, Diversification Strategy Analysis of Chinese Enterprise, 2009)
Therefore, it is necessary to use strategic management theories as the guide to find
out the corresponding countermeasures, realize the strategic adjustment and
improve core competitive abilities of enterprises.
This paper is based on the theories of strategic management. Using SWOT
analysis method to research on the diversification strategy adjustment. Finding out
the strengths, weaknesses, opportunities and threats of diversification. And also
illustrate the case of product diversification strategy in a Chinese company to put
theories into practice when research and analyse. Finally, it can be drawn a pertinent
conclusion from what I have found in relation to identify the various strengths,
weaknesses, opportunities and threats factors of diversification and formulate a
correct product diversification strategy.
3. Aim
Using SWOT analysis method to discover the strengths, weaknesses, opportunities
and threats of diversification in order to perform the advantages, overcome the
disadvantages, seize the opportunities and avoid the threats. All in all, aim to adjust
product diversification strategy to promote the growth of enterprises.
4. Objectives
1. To find out the strengths, weaknesses, opportunities and threats of applying
product diversification strategy by using SWOT analysis method.
2. To illustrate the case of diversification strategy in a Chinese company to link
theories with practice to support my argument.
3. To draw a conclusion from the findings about how to perform strengths, overcome
weaknesses, seize opportunities and avoid threats of diversification so that adjust
diversification strategy to promote the strategic management for enterprises.
5. Research methods
Using SWOT analysis method to structure SWOT matrix of diversification strategy.
The primary data will be collected by using interviews with manager and investigator
of product development department. Firstly, I will refer to some reasonable and
diversification relative questions and contents about interviews. Secondly, making
phone or video interviews with the company manager and investigator of product
development department under the help of my teacher and relatives in China. They
will arrange the interviews with interviewees. Also it will be included a section at the
end to ask the interviewees if they feel I should add anything to talk about. After
interviews I will record and write the copy of the conversations. And then transcribe
them by myself and “Express Scribe” software (a transcribing software).
6. Potential limitations
The research methods I choose will have some limitations to some extent. Because
it depends on the varying context and circumstance to some extent. And the findings
are limited by space and time. For instance, considering the limitation of whether the
data is up to date or not. The most noticeable issue is that my knowledge,
investigation and research about the cases of diversifying strategy in enterprises are
limited. I will do primary research in Chinese, not English. So I should translate
them.That may be anther limitation.
7. Resources
Reference books and journals
Reports of companies
Internet: E-journals, company websites
Interview
8. Timetable
The first period of time:
20/10/2009-31/10/2009
Meeting and discussing with my supervisor and writing my dissertation outline.
Deciding the title, direction and research fields of my dissertation
The second period of time:
01/11/2009-16/12/2009
Writing the structure of my dissertation, each chapter headings and the literature
review.
The third period of time:
17/11/2009-31/01/2009
Methodology
Collecting the data
The fourth period of time:
01/02/2010-01/03/2010
Writing the analysis and discussion parts.
After 01/03/2010
Proposing the conclusion and competing writing the abstract, introduction,
bibliography of my dissertation. Modifying the grammar mistakes, format and some
unsuitable descriptions.
Preparing sufficiently to submit the dissertation on time.
9. Proposed chapter headings
Chapter 1 Introduction
Chapter 2 Literature Review
Chapter 4 Data and methodology
Chapter 5 Analysis and discussion
Chapter 6 Conclusion
Bibliography
Appendices
10. Key references (5)
·David A. Aaker, (1998). Developing Business Strategies. 6th ed. Willey.
·Jintian Yu, Ard-Pieter de Man, Geert Duysters, Tom van Rijsewijk,(2006). Catch
up Strategies of Asian Firms: A Micro-level Perspective. Serbian Journal of
Management 1 (1) (2006) 49 – 65
·Richard P. Rumelt (1982), Diversification Strategy and Profitability. Strategic
Management Journal , 3(4), pp. 359-369
·G. Houben, K. Lenie and K. Vanhoof,(1999). A knowledge-based SWOT-analysis
system as an instrument for strategic planning in small and medium sized
enterprises
·Donato Iacobucci, Peter Rosa. (2005) Growth, Diversification, and Business
Group Formation in Entrepreneurial Firms. Small Business Economics, 25(1), pp.65-
82

In the next period before this semester,I will do the literature review and keep on meeting with my supervisor regularly.

Wish me good luck.