Monday, November 26, 2007
Thermo Electron- Question #1- Mallory Clynes
Thermo Electron was historically seen have having an unusual diversification strategy that created value for the company and its shareholders. They grew their sales over $3.6 billion, which also included power plants, artificial hearts, and laser hair removers. During the 1983-1997 time period, shareholders compound returns is averaged 28 percent a year.
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3 comments:
Bishara Etienne
2. THe significant drawbacks of this strategy is that it has caused subsidairies to rush into marketing products that were not adequately enginerred and tested. THerefore this caused sales to decline. Also it spreads scare management and engineering talent too thin over too many disparate businesses. In addition one subsidary can cast a shadow over the whole company and adversely affect both revenues and share price.
Thermo Electron Question #3 - Andrew J. Gordon
I would not say that the experiances Thermo Electron experianced invalidates the strategic plan. While yes in the long run the plan fell short of what it was trying to accomplish, initially the plan was a massive success and brought net returns to stock holders of 27 % a year. which is phenominal. I see the failure of Thermo Electron's strategic plan being directly related to poor managment skills and a sudden increase in demand for higer profits. They state that quality was sacraficed for speed of marketing a product. That right there is a lapse of judgment on the part of managment. While you can make money in the short run by getting a product out there as soon as possibnle, you are not going to sustain that profit without a viable product. Their strategic plan was good and a succes, it just needed better organazation and overall managment when it came into the later years of its existance. There is no doubt it could have continued to be a success, and it yields a model for what many companies are doing to this present day for investment capital, expecially in the biotechnology fields.
thermo Electron- #2- Eric Yoshikawa
While at first this strategy sounds very good, the idea of massing a bunch of companies together in a conglomerate. This however tends to do well for established companies. Such as GE owning GM and various other companies. Some argue if they have over extended themselves. Now back on the topic of Thermo Electron, more companies means more reports and earning statements. This means more money being spent. While this means that a few companies that aren't ass successful as other companies under Thermo Electron will bring them down. It also means that some of these companies will rush to produce products that might not be ready. Because whether you think it's true or not, they are competiting against each other. Take this for example, if one of the companies isn't doing as well as other companies there'll be more pressure to do atleast as well as that company. This will mean that the company will produce products that aren't quite ready for production. After all nobody wants to be financing the "black sheep" if you will. Buy having all of these companies under them, they are pushing companies to move faster then some of them really should be. Also as soon as Hatsopoulos stepped down as CEO in dropped about half of the companies it had aquired.
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