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Downstream glass manufacturing is local, because each market has its own characteristics, it is low scale production and it is the most important success factor is good customer relationship. This step was seen as successful by some and unsuccessful by others. During the diversification in the automotive industry the company also acquired other business of similar profile, which was seen as successful. Later on, Pilkington entered the ophthalmologic and contact lens industry, which was characterized by every analyst as failure and the manufacturer abandoned these projects. However, during this last diversification, the company didn't disinvest immediately after the management realised that it wouldn't pay off. After acquiring the ophthalmologic capabilities and being faced with unsuccessful results, the manufacturer tried to find solutions to get back on the track that would maintain the investment. Consequently, the company moved forward to contact lenses area. Pilkington had both successes and failure in its diversification strategies and throughout its long experience is this domain, it learnt that some diversifications just don't pay off because they are too far from the core business.
Intel is one of world's largest semiconductor manufacturers and the investor of x86 computer microprocessors. Its diversification into related areas sent its revenues to the ceiling. In 2001, the company decided to extend its operations to a non-related field: VoIP technologies. However the company decided to sell its VoIP business 3 years later as this service took off too slow. The management is currently focusing on its core business in which it is committed to invest extensively.
Honda is a Japanese automotive manufacturer, who is also producing trucks, jets, motorbikes, scooters, ATVs, marine engines, electric generators, lawn and garden equipment and other mobile technologies. The company's activity is quite diversified, both horizontally and geographically. Hamel and Prahalad (1994) found that there was a positive correlation between the company's diversification strategy and its commercial success. However, Mair (1999) argued that the Hamel and Prahalad offered no causal linkages for the correlation and in fact the commercial success is explained by the company's core products: automobile and...
It is very difficult to conclude that the company's wide diversification didn't impact its commercial success just because the revenues generated by non-core products are a small percentage of total sales. Diversification is not only about sales, but also about developing capabilities, such as: market knowledge, product and technology know-how and so one. At the first sight, Honda's diversification seems to be a success and an example to be followed by many other multinational companies and its strategy covered a large number of domains, foreign territories and sometimes stages along the value chain.
Reference List
Duarte, C.L. And E. Garc'a-Canal. 2004. "The Choice Between Joint Ventures and Acquisition in Foreign Direct Investments: The Role of Partial Acquisitions and Accrued Experience," Thunderbird International Business Review, vol. 46(1): pp. 39-58.
Hamel, G. And Prahalad, C.K. 1994. Competing for the Future. Boston: Harvard Business School Press.
Kogut, B. And H. Singh. 1988. "The Effect of National Culture on the Choice of Entry Mode," Journal of International Business Studies, vol. 19(3): pp. 411-432.
Lewis, H. And J.D. Richardson. 2001, forthcoming. Why Global Commitment Really Matters! Washington, D.C.: Institute for International Economics, October.
Mair, a. 1999. Learning from Japan? Interpretations of Honda Motors by Strategic Management Theorists. Nissan occasional paper series no. 29.
Penrose, E. 1959. The Theory of the Growth of the Firm. London: Basil Blackwell.
Prahalad, C.K. And Hamel, G. 1990. The Core Competence of the Corporation. Harvard Business Review, vol. May-June: pp. 79-91.
Smith, H. 2004. Is Wal-Mart Good for America? Public Broadcasting Service - Frontline, http://www.pbs.org/wgbh/pages/frontline/shows/walmart/
Williamson, O.E. 1975. "Markets and Hierarchies - Analysis and Antitrust Implications," New York, Free Press.
Zaheer, S. 1995. "Overcoming the liability of foreignness," Academy of Management Journal, vol. 38(2): pp. 341-363.
The cost, or liability, of foreignness refers to the cost of acquiring knowledge about foreign markets.
Reference List
Duarte, C.L. And E. Garc'a-Canal. 2004. "The Choice Between Joint Ventures and Acquisition in Foreign Direct Investments: The Role of Partial Acquisitions and Accrued Experience," Thunderbird International Business Review, vol. 46(1): pp. 39-58.
Hamel, G. And Prahalad, C.K. 1994. Competing for the Future. Boston: Harvard Business School Press.
Kogut, B. And H. Singh. 1988. "The Effect of National Culture on the Choice of Entry Mode," Journal of International Business Studies, vol. 19(3): pp. 411-432.
Lewis, H. And J.D. Richardson. 2001, forthcoming. Why Global Commitment Really Matters! Washington, D.C.: Institute for International Economics, October.
Smith, H. 2004. Is Wal-Mart Good for America? Public Broadcasting Service - Frontline, http://www.pbs.org/wgbh/pages/frontline/shows/walmart/
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