This Lord is Very Scientific-Chapter 808 - 740: The Impact of Diversification Strategy on Game Company Performance—A Case Study of 37 Interactive Entertainment

(Anti-theft, will be released in due course.) Abstract: With technological advancements and the coverage of smart networks, the rise of the gaming industry in recent years is evident to the populace. The dissemination of games is no longer confined to stereotypical promotional modes, and the influence of games has gradually expanded to all aspects of life. Correspondingly, game companies need to continuously integrate resources, innovate, and update to improve performance amidst the rapid development of the era. Diversification strategy precisely meets the planning needs and development goals within the gaming industry. Against the backdrop of economic globalization, diversification strategy, as the preferred model for enterprise development, is also applicable to game companies. This paper uses Sanqi Mutual Entertainment Company as an example to explain the impact of diversification strategy on the performance of game companies.

Keywords: Diversification strategy; game companies; performance; impact; Sanqi Mutual Entertainment Company

Diversification strategy is a market strategy means adopted by enterprises during the operation process to capture new markets and expand new markets. It is also a strategic plan adopted to avoid the risks encountered in operating a single business and to enter new business fields with targeted preparation. Applying diversification strategy in game companies can effectively improve company performance and bring about a process of quantitative to qualitative change in the development of game companies.

1. Macro background of diversification strategy

Entering 2021, under the strong control of the pandemic by the state, people's lives return to normalcy, and the economy and culture show a great recovery trend. On April 30, 2021, according to the relevant data published by the National Bureau of Statistics, the development of the national cultural industry has basically returned to the pre-pandemic level[1]. This is very favorable news for the gaming industry, which accounts for a large proportion of the cultural industry. Although the arrival of the pandemic did not cause significant impact on the gaming industry, the inability to conduct offline activities always affects the performance of game companies. The revival of the cultural industry means that for most game companies, this signifies a large-scale development and prosperity of the cultural industry, which can promote and drive more game companies to embark on the path of sustainable development[2].

From the outbreak of the pandemic last year to the current stability, the state has issued relevant policies to support the development of the cultural industry from various aspects such as finance, systems, and finance. Although the pandemic has hindered people's travel, it cannot control the transmission speed of the online network. More and more new media have emerged, driving the development of the cultural industry during the pandemic prevention period. However, the competition environment in the cultural industry is very fierce as all enterprises want to squeeze into the online market. Many traditional offline enterprises could not withstand the impact of the pandemic and were eliminated by society. But in these short two years, many successful transformation cultural industries have emerged. Most of these enterprises rely on diversification strategy models to accelerate transformation and upgrading during the pandemic prevention period, reaping substantial rewards due to the significant increase in residents' consumption levels. They have obtained more diversified development models and income channels, for instance, the transformation made by Sanqi Mutual Entertainment Company during the pandemic prevention period is worth learning from for most game companies[3].

2. Brief analysis and classification of diversification strategy

(1) Brief analysis of diversification strategy

Diversification strategy was proposed by Igor Ansoff, the pioneer of strategic management. In his book "What is Corporate Strategy," he mentioned the classification of diversification strategy. This influential strategic model is involved in the management policies of multiple countries, leading to every enterprise, big or small, seeking a place according to the development mode of diversification strategy today[4].

(2) Classification and its meaning of diversification strategy

Diversification strategy is divided into four types: horizontal diversification, vertical integration, concentric diversification, and conglomerate diversification. The meanings of the four different models derived from diversification strategy also vary. Horizontal diversification refers to the enterprise using the original conditions provided by the market to produce new products that can meet the new needs of users, thereby driving market consumption; Vertical integration is when an enterprise longitudinally derives based on its development situation and uses the product industry chain to penetrate other market fields to seek new consumers; Concentric diversification focuses more on the innovation of original technology and requires the production of new products within the original production scope, achieving transformation through the metamorphosis of original technology; Conglomerate diversification pays more attention to the expansion of the operating scope variation, requiring the enterprise to expand the operating scope by contacting related raw materials, technology, and market factors related to its products[5].

3. Impact of diversification strategy on game company performance

It can be said that in the operation process of all game companies, the impact of diversification strategy on the performance of game companies is uniformly divided into two parts: the change of operating modes and the shift of strategic planning. Effects gradually arise from the changes in these two parts, driving the improvement of company performance. The impact brought by diversification strategy is multi-faceted. This paper will take Sanqi Mutual Entertainment Game Company as an example to analyze the impact of diversification strategy on the performance of game companies[6].

(1) Change of operating modes

Currently, the main operating scope of Sanqi Mutual Entertainment Game Company is very extensive, which is also an advantage brought by diversification strategy. Company's business not only involves the operation of interactive entertainment, but also Sanqi Mutual Entertainment Game Company comprehensively undertakes the R&D and distribution of mobile games and web games. In recent years, it has continuously innovated following the technology trend, expanding the market to layout film, animation, and secondary dimensions. It also shapes the market cultural industry chain belonging to Sanqi Mutual Entertainment Game Company in music, VR technology, and various live streaming and other pan-entertainment businesses.

Sanqi Mutual Entertainment Game Company was founded in 1995, but the early development path was not smooth. The predecessor of Sanqi Mutual Entertainment Game Company was a small enterprise, initially not involved in the operation of gaming and other entertainment industries in its industrial chain, always at risk of being swallowed up by the market. But relying on the steady development of a single industry, Sanqi Mutual Entertainment Company was listed in 2011. However, with the later poor operation and market contraction, Sanqi Mutual Entertainment ultimately did not escape the fate of being acquired.

In 2014, Wuhu Shunrong Auto Parts Co., Ltd. acquired a 60% stake in Shanghai Sanqi Mutual Entertainment Technology Co., Ltd. Although nominally acquired, for Sanqi Mutual Entertainment, this was a development opportunity worth seizing. The two companies completed the asset restructuring of various industries under mutual cooperation. It is worth mentioning that the strategy operated by Sanqi Mutual Entertainment always showed its prominence at this time. Sanqi Mutual Entertainment Company transformed from a single modern cultural creative company before the acquisition into the current dual-main listed company with advanced production manufacturing and modern cultural creativity running parallel. Correspondingly, the company's operating strategy undergoes changes, encompassing the business scope of the original cultural creative industry.