Question

Think about the “industry” the company started in, or perhaps which industry has historically generated most of its revenue or profits.
Are these acquisitions and new brands related to that industry or something entirely new?
Do their acquisitions indicate a vertical integration strategy –or a diversification strategy?

Answer 1

Vertical Integration- Vertical integration is when a company integrates the supply chain into its core function being in the same industry.

Diversification- Diversification strategy is a strategy to minimize business risk and exposure to unprecedented events.

To answer the question we will take the example of Hitachi Corporation-

The Hitachi Corporation started in the Electrical industry and for a long time (1910-1960) most of the revenue came from sales of electrical goods such as motor and other electrical items. Gradually, the company entered electric locomotive manufacturing which was again more of vertical integration as the core competency remained the electrical and electrical appliances. Till 1980, the company had done much electrical related work in various industries which were again more of vertical integration. After 1980 till 2000 the company diversified its business slightly and entered into the construction equipment manufacturing, IT, and data hardware manufacturing. Now they are into robotics, Software, IT consulting, Energy solutions, Mobility Solutions, etc. all these are an example of their diversifications strategy. Most of the acquisition in recent history indicates the diversification strategy as the company has limited its exposure to any one industry and as the corporation grew in its size it diversified its business more rather than looking for vertical integration.