1. Should Tyco be one company or divided into six different companies? What sort of synergies does Tyco get by being one company?

|Divisions |SIC |Sales |
|Fire Protection |39 |1991 |
|Flow Control |34 |1159 |
|Electrical |36 |481 |
|Disposable |38 |1459 |
|Packaging |30 |--- |

Table 1 SIC classification (Exhibit 6)

Tyco International’s division are completely unrelated with each other as can be seen from the table above mentioning SIC codes for different divisions. There is very less resource sharing between different divisions in terms of materials, infrastructure and knowledge. They are connected to each other by the ‘Tyco’ name and the budget allocation and people policies. All the six divisions are controlled financially. The objective of this system to increase entrepreneurial behavior among the executives and different managers. Tyco in the past had grown by acquisitions of companies of different fields. So, controlling all divisions financially has led to growth of the company in systematic manner. So, Tyco International should not divided into six different companies.

Being one company, Tyco gets synergies in terms of financial control of all six divisions and governance structure. The compensation structure defined by centre facilitate the culture for achieving highest growth rate in each division and does not restrict only to achieve bare target. The freedom given to look for companies to be acquired to operational managers increases the entrepreneurial behavior among managers. The managers can themselves judge which company’s acquisition will help the growth of the division to 15 % year to year or more.

2. Is Tyco’s strategy sustainable over the longer time period? Justify your observation

Tyco’s strategy can be evaluated on the following strategies:

• Organizational process alignment with choice of business

• Alignment of initiatives with each other

• Alignment with ownership structure

Under the Fort’s regime, the acquisition were not done on the suggestion of investment bank, rather on the basis of analysis of to be acquired company by Tyco’s executives. The companies which are acquired were not completely disconnected from the current portfolio of Tyco. They took over only those where there could be some synergy between Tyco and to be acquired one like common sales and distribution force, common manufacturing plants in order to get cost of operations reduced. The six division has authority to look for potential acquisition themselves, the cetral executives come into picture only in terms of negotiation for payments. This control led to proper acquisition and not paying more. In case if decision lies in division head, there might be probability of high payment than the actual value to get control, which would lead to high debt value. So, Tyco’s strategies can said to be sustainable in terms of its alignment with above mentioned dimensions.

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Assignment 2: Tyco International