Deck 8: Corporate Strategy: Diversification and the Multibusiness Company

Question 1

Peruse the business group listings for United Technologies shown below and listed at its website ( www.utc.com ). How would you characterize the company's corporate strategy? Related diversification, unrelated diversification, or a combination related-unrelated diversification strategy? Explain your answer.
Carrier-the world's largest provider of air-conditioning, heating, and refrigeration solutions.
Hamilton Sundstrand-technologically advanced aerospace and industrial products.
Otis-the world's leading manufacturer, installer, and maintainer of elevators, escalators, and moving walkways.
Pratt Whitney-designs, manufactures, services, and supports aircraft engines, industrial gas turbines, and space propulsion systems.
Sikorsky-a world leader in helicopter design, manufacture, and service.
UTC Fire Security-fire and security systems developed for commercial, industrial, and residential customers.
UTC Power-a full-service provider of environmentally advanced power solutions.

Answer 1

The Corporate strategies of the UT has both related and unrelated diversification. It has a small collection of related and unrelated businesses. The company is diversified in a group of related businesses.
The technology and operations seems to be the same whereas the supply chain, distribution, target customers are different.
.

Question 2

What specific resources and capabilities does your company possess that would make it attractive to diversify into related businesses? Indicate what kinds of strategic fit benefits could be captured by transferring these resources and competitive capabilities to newly acquired related businesses.

Answer 2

Resources and capabilities that are considered as attractive to diversify into related business are as follows:
• Trained and experienced workforce
• Well established production system
• Availability of machinery and equipment
Strategic fit benefits that can be acquired are as follows:
• It is less risky to operate new business.
• Available resources can be used to maximum level to satisfy the demands of the customers.
• Operating cost of new business will be less.
• The known brand will benefit the business.

Question 3

ITT is a technology-oriented engineering and manufacturing company with the following business divisions and products:
Industrial Process Division-industrial pumps, valves, and monitoring and control systems; aftermarket services for the chemical, oil and gas, mining, pulp and paper, power, and biopharmaceutical markets
Motion Technologies Division-durable brake pads, shock absorbers, and damping technologies for the automotive and rail markets
Interconnect Solutions-connectors and fittings for the production of automobiles, aircraft, railcars and locomotives, oil field equipment, medical equipment, and industrial equipment
Control Technologies-energy absorption and vibration dampening equipment, transducers and regulators, and motion controls used in the production of robotics, medical equipment, automobiles, subsea equipment, industrial equipment, aircraft, and military vehicles Based on this listing, would you say that ITT's business lineup reflects a strategy of related diversification, unrelated diversification, or a combination of related and unrelated diversification? What benefits are generated from any strategic fit existing between ITT's businesses? Also, what types of companies should ITT consider acquiring that might improve shareholder value? Justify your answer.

Answer 3

When expanding into different products or markets using existing capabilities, companies can create related diversification by using its capabilities and resources in other settings. A car manufacturer might for instance expand its operations into manufacturing of motorcycles or trucks, and use its capabilities and resources to become successful in these markets.
Likewise, a company might create related diversification by integrating into the existing value network. For instance, companies producing steel might go into the mining business, where it might control the supplies etc. for its main operations. Likewise, clothes manufacturers might create their own brand shops, in which they sell their clothes.
The company should acquire successful companies in the related field to improve shareholder value.

Question 4

If your company opted to pursue a strategy of related diversification, what industries or product categories could your company diversify into that would allow it to achieve economies of scope? Name at least two or three such industries/product categories, and indicate the specific kinds of cost savings that might accrue from entry into each of these businesses/product categories.

Question 5

If your company opted to pursue a strategy of related diversification, what industries or product categories could your company diversify into that would allow your company to capitalize on using your company's present brand name and corporate image to good advantage in these newly entered businesses or product categories? Name at least two or three such industries or product categories, and indicate the specific benefits that might be captured by transferring your company's brand name to each of these other businesses/product categories.
Would you prefer to pursue a strategy of related or unrelated diversification? Why?

Question 6

See if you can identify the value chain relationships that make the businesses of the following companies related in competitively relevant ways. In particular, you should consider whether there are cross-business opportunities for (a) transferring competitively valuable resources, expertise, technological know-how and other capabilities, (b) cost sharing where value chain activities can be combined, and/or (c) leveraging use of a well-respected brand name.
OSI Restaurant Partners
• Outback Steakhouse.
• Carrabba's Italian Grill.
• Roy's Restaurant (Hawaiian fusion cuisine).
• Bonefish Grill (market-fresh fine seafood).
• Fleming's Prime Steakhouse & Wine Bar.
• Lee Roy Selmon's (Southern comfort food).
• Cheeseburger in Paradise.
• Blue Coral Seafood & Spirits (fine seafood).
L'Oréal
• Maybelline, Lancôme, Helena Rubinstein, Kiehl's, Garner, and Shu Uemura cosmetics.
• L'Oréal and Soft Sheen/Carson hair care products.
• Redken, Matrix, L'Oréal Professional, and Kerastase Paris professional hair care and skin care products.
• Ralph Lauren and Giorgio Armani fragrances.
• Biotherm skin care products.
• La Roche-Posay and Vichy Laboratories dermocosmetics.
Johnson & Johnson
• Baby products (powder, shampoo, oil, lotion).
• Band-Aids and other first-aid products.
• Women's health and personal care products (Stayfree, Carefree, Sure & Natural).
• Neutrogena and Aveeno skin care products.
• Nonprescription drugs (Tylenol, Motrin, Pepcid AC, Mylanta, Monistat).
• Prescription drugs.
• Prosthetic and other medical devices.
• Surgical and hospital products.
• Acuvue contact lenses.

Question 7

In the event that your company had the opportunity to diversify into other products or businesses of your choosing, would you opt to pursue related diversification, unrelated diversification, or a combination of both? Explain why.