2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16
A conglomerate is an organizational form of enterprise integration that unites a network of heterogeneous companies under a single financial control. When merging firms, vertical and horizontal integration, as well as industrial commonality, does not matter. A conglomerate is a direct result of the merger of various firms.
Conglomerates and concerns: what's the difference?
A concern is a financial conglomerate that emerged in a very short time as a result of the absorption of a number of functionally independent firms.
At present, transnational concerns are increasingly being formed, but only in developed countries. Their main goal is to accumulate smaller profits in countries with high taxes and make good profits in countries with low ones. Transnational concerns are controlled by entrepreneurs from one country, while multinational ones involve the international distribution of capital.
Features
The companies being merged do not have the target and technological unity with the main field of activity of the integrator.
Main production in such associations either acquiresindistinct outlines, or completely disappears. A conglomerate is a united company that retains production, economic and legal independence, but is financially completely dependent on the parent company. Compared to similar structural divisions of diversified corporations, conglomerate divisions enjoy greater autonomy and freedom in all aspects of their activities. The financial and economic methods used by the parent holding company indirectly regulate the activities of the divisions. The structure of the conglomerate is formed on the basis of a specific financial core, which, in addition to the main holding, includes investment and financial companies.
Motives for conglomerate mergers
Main motives for takeovers and conglomerate mergers:
- providing a spacious economic base;
- qualitative forecasting of changes in the structures of industries and markets;
- access to important new technologies and resources;
- opportunity to buy cheap and sell expensive;
- chance to enhance the image of the organization's leadership;
- the desire of senior staff to increase their own income;
- get synergistic effect.
Currently, among the companies listed on the New York Stock Exchange, forty companies are officially classified as conglomerates.
Famous Examples
Currently successful conglomerates are, for example, BTR, Mitsubishi, Hanson, Raytheon.
For example,Hanson's main specialization is the acquisition of technologically simple enterprises in stable market sectors. This holding company in the target organization achieves significant cost savings and supervises the performance of the management staff to ensure that they do not exceed the planned budget. It is solely through tight controls and austerity measures that the conglomerate achieves superior results from once-unprofitable businesses.
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