||Diversification is not only for large enterprises. Small and medium enterprises in Taiwan are facing with intense competition in the international market. In order to spread risk and improve operational efficiency, many of them still attempt to diversify. These are often based on their original core competence, offering new products or services, and to expand into new territory or markets. While diversifying, they may not with enough financial resources for joint ventures or mergers, but with the foundation of core technology in related areas, SMEs can also achieve the effect of sustainable development.|
Comparing with companies focused on a single business, diversified companies have the opportunity to gain competitive advantage through synergy among the various business operations, which is difficult to imitate. However, an effective management system is necessary to achieve synergy effects. This study focuses on the relationship between management system and synergy effects in a related diversified small and medium enterprise. This case study looks into the Auden Techno Corporation, from three different directions – theory, real-world practice and awareness of top executives. This study analyzes the relationship between four management system and synergy effects, and proposes changes in the following areas.
(1) Organizational structure, integration and coordination: Planning and execution of non-operating functions at remote sites should be centralized at the headquarters. As the size of the local site grows, execution can gradually de decentralized. Liaison should be established at the local sites for effective coordination and reporting.
(2) Transfer pricing: In general, business units should be free to choose their suppliers, and internal trading should be establish based on mutual profits. However, low transfer pricing protection may apply for new business units in development stage, or strategic projects with expected synergy mandated by company policy.
(3) Information sharing among business units: Information sharing platform should be established to facilitate information sharing, under appropriate security measures. Special projects may be selected, and ongoing information sharing should be done on selected topics in the form of project meetings.
(4) Performance assessment and reward systems: rewards should be directly linked with performance assessment. The performance of headquarter functions should include improvements on shared resources, satisfaction of local units, and achievement of the corporate target. The performance of business units should include synergy effects, and the synergy effects at the corporate level should be fairly allocated to the participating business units. The performance of information sharing should be assessed by quantity and quality of the information, and included the performance generated by the resulting projects.
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