Diversification has emerged as central topic of research in strategic management. Although this topic has been widely and intensively studied by scholar such as industrial organization economics, financial economics, organization theory, and marketing, perspective of process of diversification strategy is lacking. This paper attempts such a diversification strategy of Mitsubishi Heavy Industry(MHI) with a view point of process.
A wide-ranging search of causing factors to diversify firms led to the development of an overarching research framework that facilitate the analysis of process of MHI. The analysis model was consisted in environment, motivation of diversification, resources, diversification means, management system and performance.
The results from analysis of diversification strategy in MHI were represented to four model such as first period(1870~1916), second period(1917~1963), third period(1964~1973), fourth period(1974~1990). Each period had core product and technology - learning manufacturing skills of machinery for the first period, learning core products and diversifying products for the second period, creating the systematic products and diversifying products for the third period, and creating management know-how of many different core products and technologies toward high-technology industries.
In order to obtain the implications for diversification strategy of Korean heavy industry, extended diversification model was suggested based on the perspectives of using resources effectively and efficiently.
Furthermore diversification strategies of Hyundai Heavy Industry and Samsung Heavy Industry in Korea were analyzed. And the models of two Korean firms were presented and compared with the model of MHI.
Finally, this paper extracted implication from diversification strategy of MHI as follows;
1. Resource-based diversification strategy gives competitive advantages to strategy business units.
2. Portfolio of several businesses in a corporate makes profit stable.
3. In order to sustain competitive advantages, the diversification strategy on heavy industry is carried out in two perspectives - effectiveness for long-term perspective and efficiency for short-term perspective.
4. In view point of effectiveness the entering new markets are developed to acquire new core technologies and in view point of efficiency to use current core technologies.
5. Dominant logic is influenced history of diversified firms and chief executive officers, and supplies the means of managing diversified firms. Therefore, Korean heavy industry firms should, first of all, develop the dominant logic to succeed in heavy industry.
In conclusion, the advantages of diversified firms compared with that of other firms sustain the competitive advantages of strategy business unit in markets by balancing the effectiveness and efficiency in utilizing resources appropriately.
