ABSTRACT
Resort to business lines not directly connected with shipbuilding has long been a strategy of great importance to shipyards, not least because it may offer the last chance for enterprise survival. At the mundane level, absence of ship orders has frequently compelled yards to volunteer their services as general engineers. For example, a clutch of Japanese yards endured a temporary dearth of new-building work in 1979-80 by stooping to the manufacture of steel structures (IHI Chita), environ mental equipment (MHI Yokohama), chemical plant (MHI Hiroshima), atomic power equipment (IHI Yokohama), containers (MES Fujinagata) and process plants (Hitachi Zosen Ariake).1 Desirous of evading the insecurity of such short-term expedients, other yards have sought a permanently available alternative in businesses divorced from shipbuilding: in a word, they have espoused the conglomerate option. In recent years the view has taken hold that American-style conglomerates have outlived their usefulness. Condemned as unwieldy and blundering leviathans, they are castigated for their inability to focus on cogent and dynamic activities, their obsession with short-term profit-making at the expense of systematic long-term sectoral nourishment and their pre sumed tendency to extinguish innovation and entrepreneurship as they go about their business of snapping up vibrant small enterprises.2 Yet some aspects of conglomerate operations work to annul the carping directed against them and will ensure that, despite periodic set-backs, this form of industrial organisation will outlast the current predilection to disparage holding companies and the unrelated diversification that they stand for. The very size of conglomerates affords them the means to underpin sectors deemed worthy of support by their managements: as a result, cross-subsidies can sustain a favourite budding subsidiary through thick and thin (and, paradoxically, this capability summons nothing but approbation from Western observers of the Japanese version of conglomerates). Their ability to choose among a set of
industries injects a sound screening process into the investment decision; that is to say, since conglomerates are granted privileged knowledge about a number of alternative firms and in view of the fact that they are given to subscribing to the profit-maximising motive, their managements will respond by selecting only the truly deserving for growth funds while, simultaneously, allowing the undeserving to wither on the vine. In line with this thinking, the tendency of vertically integrated firms to withstand the dictates of the industrial life-cycle and delay the needed rationalisation of units bordering on senescence - a force rightly judged to be inimical to effective structural change - is overcome by conglomerate manage-ments, imbued as they are with goals of market dominance and profit maximisation.3
