Management
UTC has implemented a corporate-level strategy of unrelated diversification by acquiring companies in different industries such as aerospace and aviation, elevators, the aircraft engine and component manufacturing, lock making and security businesses. It should be highlighted that UTC accomplishes the unrelated diversification by acquiring companies that could strengthen the competencies of existing companies within conglomerate and that have potential to sustain market dominance. Hence, the focus on acquiring high potential companies enable UTC to innovate and set premium prices, which then increases returns for investors. UTC, therefore, creates value by implementing a corporation-wide system for total quality management specifically known as Achieving Competitive Excellence (ACE) that fosters improvements in business processes and disciplines through bottom-to-top employee engagement, collaboration and coordination. The purpose of this quality system is to involve every employee of every function at any organizational level to indulge in enhancing quality benchmark and product reliability. For instance, the unrelated diversification is specifically in manufacturing sector; therefore, it creates value as the process innovations and unique tasks could be replicated in other companies of UTC conglomerate. The diversification is also a blessing because the companies are unrelated; therefore, the innovations don’t lead to certain technical and decision-making problems unlike those happened in the vertical integrated businesses where an innovation is accepted when it runs smoothly in other related and integrated industries.
As far as the advantages of the unrelated diversification strategy are concerned, it should also be emphasized that unrelated diversification at UTC also increases employee recognition, job motivation, commitment and morale by providing him/her the opportunities to work in diverse industries. For example, the UTC’s CEO George David showcased optimal performance at Otis Elevator and later provided an opportunity to become conglomerate’s CEO in 1994. UTC’s mastermind of ACE system was Yuzuru Ito who worked in collaboration with Mr. David in Japan to revamp quality system for Otis elevators and eventually the global success of new elevators resulted in Ito’s appointment for championing quality improvements for entire conglomerate. Another advantage for UTC was about creating vertical relationships to attain synergy as the parent company executives interact with counterparts and subordinates of different companies in the conglomerate and identify problem-solving methods, disputed tasks, innovative processes and business restructuring for efficiency, quality, credibility and expansion. For instance, the profits of parent company and other successful group companies result in resources for acquisitions and expansions in diverse sectors. Next, the unrelated diversification also secures UTC from any conglomerate debacle unlike others because the existing businesses don’t compliment each other’s profitability and there is diverse clientele for diverse ventures. However, a major disadvantage of this corporate-level strategy of managing all unrelated diverse businesses with a unique and sophisticated multi-business model is that these companies are not stand-along and independent entities; therefore, there are apparently no specific contingency plans for these businesses that would define revival strategies during some industry-specific crisis.
The corporate-level strategy has, nonetheless, resulted in immense success for UTC conglomerate because it strengthened its momentum of growth and expansion in diverse manufacturing industries combined with addition of Building and Industrial Systems in business portfolio. In addition, UTC also expanded in different global markets especially China and Europe followed by acquisition of Grupo Ascensores Enor and disposition of Hamilton Sundstrand, Rocketdyne and other businesses that were adversely affecting group’s profitability.
