The complexity of the subsidaries can have a dampening effect on the share price. Some investors have complained that the corporate structure is too complicated. Having 23 public subsidaries means producing 23 annual reports and filing 92 quarterly earnings statement a year which is not inexpensive.
The ongoing process of spinning out companies can spread scarce mangement and engineering talent too thin over too many disparate businesses. Bad performance by one subsidary can cast a shadow over the whole company and adversely affect both revenues and share prices.
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Thermo Electron Question #3 DO the problems that Thermo Electron experienced invalidate the strategy?
The company had many subsidiaries and has given rise to a corporate structure that according to the case looks more like a strand of DNA then a chain of command. This can have an effect on share price. People have found the structure to be too complicated. This could spread scarce management and engineering talent too this over too many disparate businesses. Another problem could be that bad performance by one subsidiary can cast a shadow over the whole company and adversely affect both revenues and have price.
Thermo Electron used an unusual diversification method that increased the companies sales rapidly to $3.6 million. The company sold many different diverse products to obtain this rapid increase in the value of the company and its shareholders. This created a huge compound return average for the shareholders. This company obviously benifited from a strategy that can create much more work and unequal performances of the different subsidiaries
I did question number 1
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