Question

In its first 100 years, what type of diversification strategy

did ITW use, and how has it changed since 2012? Do you think
managers were encouraged to over diversify? Explain your
answer.

Answer 1

ITW used a related diversification strategy in its first 100 years and transitioned to a more focused diversification strategy since 2012. Managers were likely motivated to streamline the business and optimize the company's portfolio.

Step-by-step explanation:

Illinois Tool Works (ITW) used a related diversification strategy in its first 100 years. Related diversification means expanding into industries that are related to the company's core business. ITW started as a small manufacturer of steel mill equipment and gradually diversified into a wide range of industries such as automotive components, construction products, and food equipment.

Since 2012, ITW has transitioned to a more focused diversification strategy. It has been divesting non-core businesses and focusing on key growth platforms. This strategy allows the company to concentrate its resources on areas of high potential and drive greater innovation, efficiency, and profitability.

I do not think managers were encouraged to over diversify. Instead, they were likely motivated to streamline the business and optimize the company's portfolio by shedding non-core assets and aligning resources with growth opportunities.

Answer 2

Initially, ITW utilized a diversification strategy involving acquiring numerous businesses, but it later altered its approach to refocus on core areas. This was a shift from a heavily diversified conglomerate to a more streamlined and cohesive company, addressing potential issues of over-diversification.

Step-by-step explanation:

In the first 100 years of its operation, Illinois Tool Works Inc. (ITW) pursued a diversification strategy that was primarily characterized by acquiring a wide range of businesses, resulting in a large conglomerate of over 800 decentralized business units by 2012. This strategy allowed ITW to enter various markets and industries, reducing their overall risk profile. However, post-2012, ITW shifted its approach and began to refocus and streamline its business portfolio, selling off some business units to concentrate on more profitable and cohesive sectors. This move was in response to a perceived over-diversification. Managers in the conglomerate's earlier years may have been motivated to expand into new markets to reduce risk and drive growth, which led to an expansive portfolio of companies. The strategy also allowed business unit managers significant autonomy, which at times, may have led to pursuits that diverged from the core competencies of the corporation as a whole.