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Chapter 8 Corporate Strategy: Diversification and the Multibusiness Company
217
ASSURANCE OF LEARNING EXERCISES
1. 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
opportunitiesfor(1)transferringskills/technology,(2)combiningrelatedvaluechainactivitiestoachieve
economiesofscope,and/or(3)leveragingtheuseofawell-respectedbrandnameorotherresourcesthat
enhancedierentiation.
ACTIVITY
This Assurance of Learning exercise is available as a Connect Assignment. The assignment can be
graded and posted automatically.
Bloomin’ Brands
• Outback Steakhouse
• Carrabba’s Italian Grill
• Roy’s Restaurant (Hawaiian fusion cuisine)
• BoneshGrill(market-freshneseafood)
• Fleming’s Prime Steakhouse & Wine Bar
Response 1:
Thestudentshouldidentifythecompany’soverallstrategyistodierentiateitsrestaurantsbyemphasizing
consistently high-quality food and service, generous portions at moderate prices and a casual atmosphere.
Thisisagoodexampleoftwostrategictopportunities:transferringskillsandcombiningtherelatedvalue
chain activities to achieve lower costs, especially in the administrative functions.
L’Oréal
Response 2:
The student should identify the company’s overall strategy is to dierentiate its beauty products by
emphasizing high-quality cosmetics delivered via retail distribution networks. This is a good example of
twostrategictopportunities:transferringskillsandcombiningtherelatedvaluechainactivitiestoachieve
lower costs, especially in the development, production, and distribution functions.
Johnson & Johnson
• Baby products (powder, shampoo, oil, lotion)
• Band-Aidsandotherrst-aidproducts
Chapter 8 Corporate Strategy: Diversification and the Multibusiness Company
218
Response 3:
The student should identify the company’s overall strategy is to supply a broad range of personal hygene
andmedicalproductstoawiderangeofcustomers.Thisisagoodexampleoftwostrategictopportunities:
leveraging the use of a well respected brand name and combining the related value chain activities to achieve
lower costs, especially in the product development and distribution functions.
2 Peruse the business group listings for Ingersoll Rand shown below and listed at its website (company.
ingersollrand.com/ircorp/en/discover-us/our-global-brands.html). How would you characterize the com-
pany’s corporate strategy—related diversication, unrelated diversication, or a combination related-
unrelateddiversicationstrategy?Explainyouranswer.
• ARO—uid handling equipment for chemical, manufacturing, energy, pharmaceutical, and mining
industries.
Response:
The student should be able to identify that Ingersoll Rand Corporation pursues a combination of related
andunrelateddiversication.TheTermoKing,Trane,andAmericanStandardgroupshareclimatecontrol
technology and are related but serve unique markets. The Ingersoll Rand and ARO group share air and
uidhandling technologyandarerelatedbutserveuniquemarkets.Andnally, ClubCarpursueszero-
emissionsvehicletechnology.Thestudentshouldidentifythatwhilethersttwogroupsarerelatedintheir
diversication,takentogether,thetwogroupsandClubCarareunrelated.
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 ttings for the production of automobiles, aircraft, railcars and
locomotives,oileldequipment,medicalequipment,andindustrialequipment
Chapter 8 Corporate Strategy: Diversification and the Multibusiness Company
219
Control Technologies—energy absorption and vibration dampening equipment, transducers and regulators,
and motion controls used in the production of robotics, medical equipment, automobiles, sub-sea equipment,
industrial equipment, aircraft, and military vehicles
Based on the above listing, would you say that ITT’s business lineup reects a strategy of related
diversication,unrelated diversication,or acombinationof relatedand unrelateddiversication?What
benets are generated from any strategic t existing between ITT’s businesses? Also, what types of
companies should ITT consider acquiring that might improve shareholder value? Justify your answer.
ACTIVITY
This Assurance of Learning exercise is available as a Connect Assignment. The assignment can be
graded and posted automatically.
Response:
ThestudentshouldbeabletoidentifythatITTpursuesunrelateddiversicationandinthissensecouldbe
viewed as a conglomerate. This approach allows each business unit to develop an independent competitive
approach and strategy that is best suited to its individual market space.
Thestudentshouldidentifythatcompaniespursuingunrelateddiversicationoftenacquireexistingbusiness
