THE EFFECT OF COMPETITIVE STRATEGY AND PORTFOLIO THEORY ON ENTERPRISE PERFORMANCE ─ A COMPARATIVE STUDY OF CHINESE MAINLAND-BASED AND TAIWAN-BASED COMPANIES IN CHINA’S DOMESTIC MARKET

Abstract

Since I came to Chinese mainland from Taiwan region for Investment in 1995, I found out different corporate behaviors between Chinese mainland-based and Taiwan-based enterprises in China’s domestic market. As a result, they may show different enterprise performance, which arouses my great research motivation. Through the analysis of the changes in global political, economic and financial environment, we compare the Chinese mainland-based enterprises and Taiwan-based enterprises in China’s domestic market, and find out the organizational differences between these two kinds of enterprises. These enterprises adopt different “competitive strategy” and “portfolio” based on their understanding of the exogenous variables, i.e., “external environment changes” and “international resource strengths” to maximize their “enterprise performance”. Mediator-based competitive strategies include cost position strategy, differentiation position strategy, resource leverage strategy and opportunity strategy; portfolio covers vertical-horizontal integration, equity ratio of direct investment, and number of direct investment projects; outcome variable-based enterprise performance includes profit rate, return on shareholders’ equity (ROE) and sales growth rate. Based on the corporate strategy, we distributed 60-question questionnaires to 14 industrial categories, 19 sample sub-groups, and collected 1,076 individuals of the sample, with a collection ratio of 32.75%, for 3,285 corporations by both paper and electronic, through a third party, of which 1,038 are valid, accounting for 96.47%. Among them, 445 were collected from Taiwan-based enterprises, accounting for 42.9%, and 593 were collected from Chinese mainland-based enterprises, accounting for 57.1%. Our analysis tool is SPSS, and analysis methods include descriptive statistical analysis, construct validity analysis, reliability analysis, correlation analysis, multiple regression analysis and cluster analysis. We set up 8 hypotheses and 56 sub-hypotheses, and draw the following conclusions through empirical analysis: H1: Changes in the external environment of an enterprise will affect the enterprise’s competitive strategy →Are supported. H2: The internal advantages of an enterprise will affect the enterprise’s competitive strategy →Are supported. H3: Changes in the external environment of an enterprise will affect the enterprise’s portfolio strategy → Are supported partially. H4: The internal advantages of an enterprise will affect the enterprise’s portfolio strategy →Are supported. H5: The competitive strategy of an enterprise will affect the enterprise’s enterprise performance → Are supported partially. H6: The portfolio strategy of an enterprise will affect the enterprise’s enterprise performance → Are supported partially. H7: The essence of an enterprise will affect the relationship between its competitive strategy and enterprise performance → Are supported partially. H8: The essence of an enterprise will affect the relationship between its portfolio strategy and enterprise performance →Are supported partially. Through cluster analysis, we find that different enterprises have different competitive strategies and portfolio strategies. Cluster analysis can not only explain the differences among different groups, but also identify different business synergies corresponding to different strategic choices of enterprises. Based on the results of Enterprise Performance assessment, we name business synergies according to the business form of each type of enterprise, so as to provide guidance and reference for other enterprises. This research develop a competitive strategy and portfolio fitting model, so call Yen Mu Chen Integrated Strategy Matrix Model ( YMC Model ). It is found that in the YMC Model, the 3×3 matrix can produce 9 strategies, which can be divided into three groups “ 2 3 4 Integrated Strategy Groups ” according to their differences in profit rate, ROE and sales growth rate: 1. Low Enterprise Performance Group: Type 1: Resources Foundation Type Type 4: Steadily Root-Planting Type 2. Moderate Enterprise Performance Group: Type 2: Concentrated Advantage Type Type 5: Profitability Upgrade Type Type 7: Resources Advancing Type 3. High Enterprise Performance Group:Type 3: Aggressively-Jump Challenging Type Type 6: Boundary Spanning Type Type 8: Stable Promoting Type Type 9: Industry Leading Type The Industry Leading Type will present the best performance in YMC Model. It is suggested that enterprises can maintain their strategic advantages to hold the leading position. We suggest enterprises to evaluate their own resource advantages, find out their competitive advantages and choose their portfolio strategies according to the external environment and their own position, and build the best decision-making model. Finally, theoretical and practical implications are provided for Chinese mainland-based and Taiwan-based enterprises in YMC Model.