Industrial Process Division—industrial pumps, valves, and monitoring and control
ID: 2468359 • Letter: I
Question
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, sub-sea equipment, industrial equipment, aircraft, and military vehicles.
Based on the above 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.
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, sub-sea equipment, industrial equipment, aircraft, and military vehicles.
Based on the above 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.
Explanation / Answer
Hi,
Please find the correct answer below:
ITTs business lineup reflects a strategy of related diversification since it makes different industrial products for similar end users. The benefit from this kind of business is that the producer can provide end to end solution for its clients. Another benefit is that even if the demand in one industry falls, it will be compensated by demand from other related industry. For instance, if the demand from the automobile falls then it can be compensated by demand from airspace industry. It highly unlikely that demand in all the sectors will fall at once. ITT should focus on acquiring its suppliers and other related companies so that it can have full control over its supply of products in case any of its suppliers fail to deliver at time or if contract negotiations do not work out with the suppliers. Backward integration should be the strategy to be followed by ITT for acquisitions.