Conglomerate (company)

Conglomerate (company)

A conglomerate is a corporation that is made up of a number of different, seemingly unrelated businesses. In a conglomerate, one company owns a controlling stake in a number of smaller companies, which conduct business separately. Each of these companies is a subsidiary of the conglomerate.

History

The term "conglomerate" was coined in the United States in the late 1960s to describe a trend of companies diversifying their interests across industry boundaries. The largest conglomerates diversified through acquisitions. Notable examples of conglomerates include General Electric, Berkshire Hathaway, and 3M.

Structure

A conglomerate is structured so that a single corporation, the parent company, owns a controlling stake in a number of subsidiaries. This structure allows the conglomerate to diversify its portfolio and reduce risk. The subsidiaries operate independently of each other, but are controlled by the parent company.

Advantages and Disadvantages

There are several advantages to the conglomerate structure. It allows a company to diversify its business operations, which can reduce risk. It also allows a company to take advantage of synergies between its different businesses.

However, there are also disadvantages to the conglomerate structure. It can be difficult to manage a large number of different businesses. There is also the risk of antitrust violations if a conglomerate becomes too large and powerful.

Examples

Some of the most well-known conglomerates include General Electric, which has businesses in the fields of technology, energy, and finance; Berkshire Hathaway, which owns companies in a variety of industries including insurance, utilities, and food and beverage; and 3M, which produces a wide range of products including adhesives, abrasives, and medical products.

See also

• Multinational corporation
• Holding company
• Subsidiary