A conglomerate is a tight control in order to increase profits

A conglomerate is an organizational formIntegration of enterprises, which unites a network of diverse companies under a single financial control. When merging a company, vertical and horizontal integration, as well as a production community, does not matter. The conglomerate is the 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 independent firms in a functional plan.

conglomerate is

At the present time,transnational concerns, but only in developed countries. Their main goal is to accumulate less profit in countries with high taxes and get a good profit in low-income countries. Transnational concerns are controlled by entrepreneurs of one country, while multinationals presuppose an international distribution of capital.

Features

Unified companies do not have the target and technological unity with the main scope of the integrator.

financial conglomerate

Profiling industry in such associationseither acquires an indistinct outline, or completely disappears. The conglomerate is a unified company that preserves production, economic and legal independence, but financially dependent entirely on the parent company. In comparison with similar structural divisions of diversified concerns, branches of conglomerates 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 units. 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.

Motifs of Conglomerate Mergers

The main reasons for the absorption of companies and conglomerate mergers:

  • providing a spacious economic basis;
  • qualitative forecasting of changes in the structures of industries and markets;
  • access to new important technologies and resources;
  • the possibility of a cheap purchase and an expensive sale;
  • chance to improve the image of the organization's management;
  • the desire of management to increase their own incomes;
  • get a synergistic effect.

Currently, among companies whose shares are traded on the New York Stock Exchange, they are officially classified as conglomerates of forty companies.

Known Examples

Currently, a successful conglomerate is, for example, BTR, Mitsubishi, Hanson, Raytheon.

conglomerate structure
For example, the main specialization of Hanson -acquisition of technologically uncomplicated enterprises in stable sectors of the market. This holding company in the absorbed organization achieves a significant reduction in production costs and controls the work of management personnel, ensuring that they do not go beyond the planned budget. Due to strict control methods and economic measures, the conglomerate achieves excellent results from once unprofitable enterprises.

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