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A conglomerate is a multi-industry company – i.e., a combination of multiple
business entities In law Law is a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surrounded and influenced by its environment, is described by its b ...
operating in entirely different industries under one
corporate group A corporate group or group of companies is a collection of parent and subsidiary corporations A corporation is an organization—usually a group of people or a company A company, abbreviated as co., is a Legal personality, legal entity ...
, usually involving a
parent company A parent company is a company A company, abbreviated as co., is a Legal personality, legal entity representing an association of people, whether Natural person, natural, Legal personality, legal or a mixture of both, with a specific objective. ...
and many
subsidiaries A subsidiary, subsidiary company or daughter company is a company A company, abbreviated as co., is a Legal personality, legal entity representing an association of people, whether Natural person, natural, Legal personality, legal or a mixture ...
. Conglomerates are often large and
multinational Multinational may refer to: * Multinational corporation, a corporate organization operating in multiple countries * Multinational force, a military body from multiple countries * Multinational state, a sovereign state that comprises two or more nat ...
.


History

Often labelled a
trading companyTrading companies are business Business is the activity of making one's living or making money by producing or buying and selling Product (business), products (such as goods and services). Simply put, it is "any activity or enterprise entered in ...
(i.e. a company of merchants who buy and sell goods produced by other people) or sometimes a
shipping company Freight companies are companies that specialize in the moving (or "Freight forwarding, forwarding") of freight, or cargo, from one place to another. These companies are divided into several variant sections. For example, international freight forwa ...
, the
Dutch East India Company The Dutch East India Company, officially the United East India Company ( nl, Vereenigde Oost Indische Compagnie; VOC), was a multinational corporation A multinational company (MNC) is a corporate organization that owns or controls the pro ...

Dutch East India Company
(VOC) was in fact a proto-conglomerate at the dawn of modern capitalism, diversifying into multiple commercial and industrial activities such as
international trade International trade is the exchange of capital Capital most commonly refers to: * Capital letter Letter case (or just case) is the distinction between the letters that are in larger uppercase or capitals (or more formally ''majuscule ...
(especially intra-Asian trade), shipbuilding, and both production and trade of East Indian spices, Indonesian coffee, Formosan sugarcane,Shih, Chih-Ming; Yen, Szu-Yin (2009). ''The Transformation of the Sugar Industry and Land Use Policy in Taiwan'', in ''Journal of Asian Architecture and Building Engineering'' :1 pp. 41–48Tseng, Hua-pi (2016). ''Sugar Cane and the Environment under Dutch Rule in Seventeenth Century Taiwan'', in ''Environmental History in the Making'', pp. 189–200 and
South African wine South is one of the cardinal direction The four cardinal directions, or cardinal points, are the directions north, east, south, and west, commonly denoted by their initials N, E, S, and W. East and west are perpendicular (at right angles) to ...
.Estreicher, Stefan K. (2014), 'A Brief History of Wine in South Africa,'. European Review 22(3): pp. 504–537. Fourie, Johan; von Fintel, Dieter (2014), 'Settler Skills and Colonial Development: The
Huguenot The Huguenots ( , also , ) were a religious group of French French (french: français(e), link=no) may refer to: * Something of, from, or related to France France (), officially the French Republic (french: link=no, République fran ...

Huguenot
s in Eighteenth-Century Dutch South Africa,'. The Economic History Review 67(4): 932–963.
Williams, Gavin (2016), 'Slaves, Workers, and Wine: The 'Dop System' in the History of the Cape Wine Industry, 1658–1894,'.
Journal of Southern African Studies The ''Journal of Southern African Studies'' is an international publication which covers research on the Southern Africa Southern Africa is the southernmost region of the African continent A continent is one of several large landmass ...
42(5): 893–909


United States


The conglomerate fad of the 1960s

During the 1960s, the United States was caught up in a "conglomerate
fad A fad is any form of collective behavior The expression collective behavior was first used by Franklin Henry and employed later by Robert E. , Herbert , Ralph H. Turner and Lewis Killian (1957), and Neil to refer to social processes and e ...
" which turned out to be a form of speculative mania. Due to a combination of low interest rates and a repeating
bear-bull market A market trend is a perceived tendency of financial markets to move in a particular direction over time. These trends are classified as ''secular'' for long time frames, ''primary'' for medium time frames, and ''secondary'' for short time frames. Tr ...
, conglomerates were able to buy smaller companies in
leveraged buyout A leveraged buyout (LBO) is one company's acquisition of another company using a significant amount of borrowed money (Leverage (finance), leverage) to meet the cost of acquisition. The assets of the company being acquired are often used as coll ...
s (sometimes at temporarily deflated values). Famous examples from the 1960s include
Ling-Temco-Vought Ling-Temco-Vought (LTV) was a large US conglomerate Conglomerate or conglomeration may refer to: * Conglomerate (company) * Conglomerate (geology) * Conglomerate (mathematics) In popular culture: * The Conglomerate (American group), a productio ...
,.
ITT Corporation ITT Inc., formerly ITT Corporation, is an American worldwide manufacturing company based in Stamford, Connecticut. The company produces specialty components for the aerospace, transportation, energy and industrial markets. ITT's three businesses ...
,
Litton Industries Litton Industries was a large defense contractor in the United States The United States of America (USA), commonly known as the United States (U.S. or US), or America, is a country Contiguous United States, primarily located in North Ameri ...
,
Textron Textron Inc. is an American industrial conglomerate Conglomerate or conglomeration may refer to: * Conglomerate (company) * Conglomerate (geology) * Conglomerate (mathematics) In popular culture: * The Conglomerate (American group), a product ...

Textron
, and
Teledyne Teledyne Technologies Incorporated is an American industrial conglomerate. It was founded in 1960, as Teledyne, Inc., by Henry Singleton and George Kozmetsky. From August 1996 to November 1999, Teledyne existed as part of the conglomerate Alle ...
. The trick was to look for acquisition targets with solid earnings and much lower
price–earnings ratio 's plot of the S&P composite real price–earnings ratio and interest rates (1871–2012), from '' Irrational Exuberance'', 2d ed. In the preface to this edition, Shiller warns that "the stock market has not come down to historical levels: the pr ...
s than the acquirer. The conglomerate would make a
tender offer In corporate finance, a tender offer is a type of public takeover bid. The tender offer is a public, open offer or invitation (usually announced in a newspaper advertisement) by a prospective acquirer to all shareholders, stockholders of a public c ...
to the target's shareholders at a princely premium to the target's current stock price. Upon obtaining shareholder approval, the conglomerate usually settled the transaction in something other than cash, like
debenture In corporate finance Corporate finance is the area of finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and ...
s,
bond Bond or bonds may refer to: Common meanings * Bond (finance) In finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of ...
s, warrants or convertible debentures (issuing the latter two would effectively dilute its own shareholders down the road, but many shareholders at the time were not thinking that far ahead). The conglomerate would then add the target's earnings to its own earnings, thereby increasing the conglomerate's overall
earnings per share Earnings per share (EPS) is the monetary value of earningsEarnings are the net benefits of a corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single ...

earnings per share
. In finance jargon, the transaction was " accretive to earnings." The relatively lax accounting standards of the time meant that accountants were often able to get away with creative mathematics in calculating the conglomerate's post-acquisition consolidated earnings numbers. In turn, the price of the conglomerate's own stock would go up, thereby re-establishing its previous price-earnings ratio, and then it could repeat the whole process again with a new target. In plain English, conglomerates were using rapid acquisitions to create the illusion of rapid growth. In 1968, the peak year of the conglomerate fad, U.S. corporations completed a record number of mergers: approximately 4,500. In that year, at least 26 of the country's 500 largest corporations were acquired, of which 12 had assets in excess of $250 million. All this clever
financial engineering Financial engineering is a multidisciplinary field involving financial theory, methods of engineering Engineering is the use of scientific method, scientific principles to design and build machines, structures, and other items, including b ...

financial engineering
had very real consequences for people who worked for companies that were either acquired by conglomerates or were seen as likely to be acquired by them. Acquisitions were a disorienting and demoralizing experience for executives at acquired companies—those who were not immediately
laid off A layoff or downsizing is the temporary suspension or permanent termination of employment of an employee or, more commonly, a group of employees (collective layoff) for business reasons, such as personnel management or downsizing (reducing the s ...
found themselves at the mercy of the conglomerate's executives in some other distant city. Most conglomerates' headquarters were located on the
West CoastWest Coast or west coast may refer to: Geography Australia * Western Australia *Regions of South Australia#Weather forecasting, West Coast of South Australia * West Coast, Tasmania **West Coast Range, mountain range in the region Canada * British ...
or
East Coast East Coast may refer to: Entertainment * East Coast hip hop, a subgenre of hip hop * East Coast (ASAP Ferg song), "East Coast" (ASAP Ferg song), 2017 * East Coast (Saves the Day song), "East Coast" (Saves the Day song), 2004 * East Coast FM, a rad ...
, while many of their acquisitions were located in the country's interior. Many interior cities were devastated by repeatedly losing headquarters of corporations to mergers, in which independent ventures were reduced to subsidiaries of conglomerates based in New York or Los Angeles. Pittsburgh, for example, lost about a dozen. The terror instilled by the mere prospect of such harsh consequences for executives and their home cities meant that fending off takeovers, real or imagined, was a constant distraction for executives at all corporations seen as choice acquisition targets during this era. The chain reaction of rapid-growth-through-acquisitions could not last forever. When interest rates rose to offset rising
inflation In economics, inflation refers to a general progressive increase in prices of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a r ...

inflation
, conglomerate profits began to fall. The beginning of the end came in January 1968, when Litton shocked Wall Street by announcing a quarterly profit of only 21 cents per share, versus 63 cents for the previous year's quarter. It would take two more years before it was clear that the conglomerate fad was on its way out. The stock market eventually figured out that the conglomerates' bloated and inefficient businesses were as cyclical as any others—indeed, it was that cyclical nature that had caused such businesses to be such undervalued acquisition targets in the first place—and their descent "put the lie to the claim that diversification allowed them to ride out a downturn." A major selloff of conglomerate shares ensued. To keep going, many conglomerates were forced to shed the new businesses they had recently purchased, and by the mid-1970s most conglomerates had been reduced to shells. The conglomerate fad was subsequently replaced by newer ideas like focusing on a company's
core competency A core competency is a concept in management theory introduced by C. K. Prahalad and Gary Hamel Gary P. Hamel (born 1954) is an American management consultant. He is a founder of Strategos, an international management consulting Management cons ...
and unlocking
shareholder value Shareholder value is a business term, sometimes phrased as shareholder value maximization or as the shareholder value model, which implies that the ultimate measure of a company's success is the extent to which it enriches shareholders. It became pr ...
(which often translate into
spin-off A spin-off is something that was created as a byproduct of something else. Types of spin-offs include: *Spin-off (media), a new media product derived from an existing product or franchise *Corporate spin-off, a type of corporate transaction formin ...
s).


Genuine diversification

In other cases, conglomerates are formed for genuine interests of
diversification Diversification may refer to: Biology and agriculture * Genetic divergence, emergence of subpopulations that have accumulated independent genetic changes * Agricultural diversification involves the re-allocation of some of a farm's resources to ne ...
rather than manipulation of paper return on investment. Companies with this orientation would only make acquisitions or start new branches in other sectors when they believed this would increase profitability or stability by sharing risks. Flush with cash during the 1980s,
General Electric General Electric Company (GE) is an American multinational Multinational may refer to: * Multinational corporation, a corporate organization operating in multiple countries * Multinational force, a military body from multiple countries * Mult ...
also moved into
financingFunding is the act of providing resources to finance a need, program, or project. While this is usually in the form of money, it can also take the form of effort or time from an organization or company. Generally, this word is used when a firm uses i ...
and
financial services Financial services are the economic services provided by the finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of mone ...
, which in 2005 accounted for about 45% of the company's net earnings. GE formerly owned a minority interest in
NBCUniversal NBCUniversal Media, LLC, traded as NBCUniversal (formerly known as NBC Universal, Inc. from 2004 to 2011), is an American multinational Multinational may refer to: * Multinational corporation, a corporate organization operating in multiple countr ...
, which owns the
NBC The National Broadcasting Company (NBC) is an American American(s) may refer to: * American, something of, from, or related to the United States of America, commonly known as the United States The United States of America (USA), co ...
television network A television network or broadcaster is a telecommunications network A telecommunications network is a group of nodes interconnected by links that are used to exchange messages between the nodes. The links may use a variety of technologies bas ...
and several other
cable network Networking cables are networking hardware used to connect one network device to other network devices or to connect two or more computers to share printers, scanners etc. Different types of network cables, such as coaxial cable Coaxial cable, ...
s. In some ways GE is the opposite of the "typical" 1960s conglomerate in that the company was not highly
leveragedIn finance, leverage (or gearing in the United Kingdom and Australia) is any technique involving using debt (borrowed funds) rather than fresh Equity (finance), equity in the purchase of an asset, with the expectation that the after-tax profit to equ ...
, and when
interest rates An interest rate is the amount of interest Interest, in finance and economics, is payment from a debtor, borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the a ...
rose GE was able to turn this to its advantage. It was often less expensive to lease from GE than buy new equipment using loans.
United Technologies United Technologies Corporation (UTC) was an American multinational conglomerate headquartered in Farmington, Connecticut. It merged with the Raytheon Company The Raytheon Company was a major List of United States defense contractors, ...
was also a successful conglomerate until it was dismantled in the late
2010s File:2010s collage v21.png, From left, clockwise: Anti-government protests during the Arab Spring The Arab Spring ( ar, الربيع العربي) was a series of anti-government protests, uprisings, and armed rebellions that spread across ...
.


Mutual funds

With the spread of
mutual fund A mutual fund is a professionally managed investment fund Image:Financial info.jpg, The values and performance of collective funds are listed in newspapers. An investment fund is a way of investment, investing money alongside other investors in or ...
s (especially
index fund An index fund (also index tracker) is a mutual fund A mutual fund is an open-end professionally managed investment fund that pools money from many investors to purchase securities. Mutual funds are "the largest proportion of equity of U.S. corpor ...
s since 1976), investors could more easily obtain diversification by owning a small slice of many companies in a fund rather than owning shares in a conglomerate. Another example of a successful conglomerate is
Warren Buffett Warren Edward Buffett ( ; born August 30, 1930) is an American business magnate, investor, and philanthropist. He is currently the chairman and CEO of Berkshire Hathaway Berkshire Hathaway () is an American Multinational corporation, multi ...
's
Berkshire Hathaway Berkshire Hathaway () is an American multinational Multinational may refer to: * Multinational corporation, a corporate organization operating in multiple countries * Multinational force, a military body from multiple countries * Multinational ...

Berkshire Hathaway
, a
holding company A holding company is a company whose primary business is holding a controlling interest in the securities of other companies. A holding company usually does not produce goods or services itself. Its purpose is to own shares of other companies ...
which used surplus capital from its insurance
subsidiaries A subsidiary, subsidiary company or daughter company is a company A company, abbreviated as co., is a Legal personality, legal entity representing an association of people, whether Natural person, natural, Legal personality, legal or a mixture ...
to invest in businesses across a variety of industries.


International

The end of the
First World War World War I, often abbreviated as WWI or WW1, also known as the First World War or the Great War, was a that began on 28 July 1914 and ended on 11 November 1918. It involved much of , as well as , the and , and was also fought ...

First World War
caused a brief economic crisis in
Weimar Germany The Weimar Republic (german: Weimarer Republik ) was the German state from 1918 to 1933 when it functioned as a federal constitutional republic. The state was officially named the German Reich (german: Deutsches Reich, link=no, label=none), ...
, permitting entrepreneurs to buy businesses at rock-bottom prices. The most successful,
Hugo Stinnes Hugo Dieter Stinnes (12 February 1870 – 10 April 1924) was a German industrialist. Life and career Stinnes was born in Mülheim, in the Ruhr Valley, North German Confederation. His parents Hermann Hugo (1842–1887) and Adeline Stinnes (1844 ...
, established the most powerful private economic conglomerate in 1920s Europe – Stinnes Enterprises – which embraced sectors as diverse as manufacturing, mining, shipbuilding, hotels, newspapers, and other enterprises. The best known
British British may refer to: Peoples, culture, and language * British people, nationals or natives of the United Kingdom, British Overseas Territories, and Crown Dependencies. ** Britishness, the British identity and common culture * British English, ...

British
conglomerate was
Hanson plc Hanson UK, formerly Hanson Trust plc, is a British based building materials company, headquartered in Maidenhead Maidenhead is a market town in Berkshire, England, on the southwestern bank of the River Thames. It has an estimated population o ...
. It followed a rather different timescale than the U.S. examples mentioned above, as it was founded in 1964 and ceased to be a conglomerate when it split itself into four separate listed companies between 1995 and 1997. In
Hong Kong Hong Kong (; , ), officially the Hong Kong Special Administrative Region of the People's Republic of China (HKSAR), is a and of China on the eastern in . With over 7.5 million residents of various nationalities in a territory, Hong ...

Hong Kong
, some of the well-known conglomerates include
Jardine Matheson Jardine Matheson Holdings Limited (also known as Jardines) is a Hong Kong Hong Kong (, ), officially the Hong Kong Special Administrative Region of the People's Republic of China (HKSAR) (), is a metropolitan area and Special administr ...
(AD1824),
Swire Group Swire Group () is a Hong Kong Hong Kong (, ), officially the Hong Kong Special Administrative Region of the People's Republic of China (HKSAR) (), is a metropolitan area and Special administrative regions of China, special administrati ...
(AD1816), (British companies, one Scottish one English; companies that have a history of over 150 years and have business interests that span across four continents with a focus in Asia.) C K Hutchison Whampoa (now
CK Hutchison Holdings CK Hutchison Holdings Limited company, Limited is a Hong Kong-based and Cayman Islands-registered multinational Conglomerate (company), conglomerate. The company was formed in March 2015 through the merger of Cheung Kong Holdings and its main as ...
),
Sino Group Sino Group () is a property developer in Hong Kong, property company in Hong Kong. The Group comprises private holding companies owned by the Ng Family, and three publicly listed companies that include Tsim Sha Tsui Properties Limited, Sino Land C ...
, (both Asian-owned companies specialize business such as real estate and hospitality with a focus in Asia.) *
Swire Group Swire Group () is a Hong Kong Hong Kong (, ), officially the Hong Kong Special Administrative Region of the People's Republic of China (HKSAR) (), is a metropolitan area and Special administrative regions of China, special administrati ...
(AD1816) (or Swire Pacific) Started by Liverpool natives the Swire family, which controls a wide range of businesses, including property (
Swire Properties Swire Properties Limited () is a property developer, owner and operator of mixed-use, principally commercial properties in Hong Kong and Mainland China. Founded and headquartered in Hong Kong in 1972, Swire Properties is a major property devel ...
), aviation (i.e.
Cathay Pacific Cathay Pacific Airways Ltd. (CPA), more widely known as Cathay Pacific (), is the flag carrier A flag carrier is a transportation company, such as an airline or shipping company, that, being locally registered in a given sovereign state, ...
), beverages (bottler of
Coca-Cola Coca-Cola, or Coke, is a carbonated Carbonation is the chemical reaction A chemical reaction is a process that leads to the chemical transformation of one set of chemical substances to another. Classically, chemical A chemical sub ...

Coca-Cola
), shipping and trading. *
Jardine Matheson Jardine Matheson Holdings Limited (also known as Jardines) is a Hong Kong Hong Kong (, ), officially the Hong Kong Special Administrative Region of the People's Republic of China (HKSAR) (), is a metropolitan area and Special administr ...
(AD1824) operates businesses in the fields of property (
Hongkong Land Landmark Atrium, property owned by Hongkong Land in Central Hongkong Land (HKL) is a property investment, management and development groups with premium commercial and residential property interests across Asia. It owns and manages some 850,00 ...
), finance (
Jardine Lloyd Thompson Jardine Lloyd Thompson Group, also known as JLT Group or simply JLT, is a British multinational corporation A multinational company (MNC) is a corporate organization that owns or controls the production of goods or services in at least one coun ...
), trading, retail (
Dairy Farm Dairy Farm International Holdings Limited is a Hong Kong retail company with its legal base in Bermuda. A member of the Jardine Matheson, Jardine Matheson Group, it is a major pan-Asian retailer involved in the processing and wholesaling of food ...

Dairy Farm
) and hotels (i.e.
Mandarin Oriental Mandarin Oriental Hotel Group International Limited (MOHG) is a Hong Kong Hong Kong (, ), officially the Hong Kong Special Administrative Region of the People's Republic of China (HKSAR) (), is a metropolitan area and Special administra ...
). * CK Hutchison Holdings Limited: Telecoms, Infrastructure, Ports, Health and Beauty Retail. Energy, Finance *
Sino Group Sino Group () is a property developer in Hong Kong, property company in Hong Kong. The Group comprises private holding companies owned by the Ng Family, and three publicly listed companies that include Tsim Sha Tsui Properties Limited, Sino Land C ...
In
Japan Japan ( ja, 日本, or , and formally ) is an in . It is situated in the northwest , and is bordered on the west by the , while extending from the in the north toward the and in the south. Japan is a part of the , and spans of coveri ...

Japan
, a different model of conglomerate, the ''
keiretsu A is a set of companies A company, abbreviated as co., is a Legal personality, legal entity representing an association of people, whether Natural person, natural, Legal personality, legal or a mixture of both, with a specific objective. Comp ...

keiretsu
'', evolved. Whereas the Western model of conglomerate consists of a single corporation with multiple subsidiaries controlled by that corporation, the companies in a keiretsu are linked by interlocking shareholdings and a central role of a bank.
Mitsui is one of the largest keiretsu in Japan and one of the largest corporate groups in the world. The major companies of the group include Mitsui & Co. (sogo shosha, general trading company), Sumitomo Mitsui Banking Corporation, Sapporo Breweries, ...

Mitsui
,
Mitsubishi The is a group of autonomous Japan , image_flag = Flag of Japan.svg , alt_flag = Centered deep red circle on a white rectangle , image_coat = Imperial Seal of Japan.svg , alt_coat ...

Mitsubishi
,
Sumitomo The is one of the largest Japanese ''keiretsu A is a set of company, companies with interlocking business relationships and shareholder, shareholdings. In the legal sense, it is a type of informal business group that are loosely organized alli ...
are some of Japan's best known keiretsu, reaching from automobile manufacturing to the production of electronics such as televisions. While not a keiretsu,
Sony , commonly known as Sony and stylized as SONY, is a Japanese multinational Multinational may refer to: * Multinational corporation, a corporate organization operating in multiple countries * Multinational force, a military body from multi ...

Sony
is an example of a modern Japanese conglomerate with operations in
consumer electronics Consumer electronics or home electronics are electronic Electronic may refer to: *Electronics Electronics comprises the physics, engineering, technology and applications that deal with the emission, flow and control of electrons in vacuum ...
,
video games#REDIRECT Video game#REDIRECT Video game A video game is an electronic game that involves interaction with a user interface or input device such as a joystick, game controller, controller, computer keyboard, keyboard, or motion sensing device ...
, the
music industry The music industry consists of the individuals and organizations that earn money by s and s, creating and selling and , presenting , as well as the organizations that aid, train, represent and supply creators. Among the many individuals and ...
, television and film production and distribution,
financial services Financial services are the economic services provided by the finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of mone ...
, and
telecommunications Telecommunication is the transmission of information by various types of technologies over , radio, , or other systems. It has its origin in the desire of humans for communication over a distance greater than that feasible with the , but with ...
. In
China China (), officially the People's Republic of China (PRC; ), is a country in . It is the world's , with a of more than 1.4 billion. China spans five geographical and 14 different countries, the in the world after . Covering an area of ap ...

China
, many of the country's conglomerates are
state-owned enterprises A state-owned enterprise (SOE) or government-owned enterprise (GOE) is a business enterprise Business is the activity of making one's living or making money by producing or buying and selling Product (business), products (such as goods a ...
, but there is a substantial number of private conglomerates. Notable conglomerates include BYD,
CIMC China International Marine Containers (Group) Co., Ltd (CIMC; ) is a Chinese company principally engaged in the manufacture and sale of transportation Transport (commonly used in the U.K.), or transportation (used in the U.S.), is the Motion ...
,
China Merchants Bank 175px, Headquarters of China Merchants Bank in the West Futian District of Shenzhen China Merchants Bank (CMB) () is a Chinese bank headquartered in Futian District, Shenzhen, Guangdong, China. Founded in 1987, it is the first share-holding comm ...
,
Huawei Huawei Technologies Co., Ltd. ( ; ) is a Chinese multinational Multinational may refer to: * Multinational corporation, a corporate organization operating in multiple countries * Multinational force, a military body from multiple countries * M ...
, JXD, Meizu, Ping An Insurance, TCL Corporation, TCL, Tencent, TP-Link, ZTE, Legend Holdings, Dalian Wanda Group, China Poly Group, Beijing Enterprises, and Fosun International Limited, Fosun International. Fosun is currently China's largest civilian-run enterprise, civilian-run conglomerate by revenue. In South Korea, the ''chaebol'' are a type of conglomerate owned and operated by a family. A chaebol is also inheritable, as most of current presidents of chaebols succeeded their fathers or grandfathers. Some of the largest and most well-known Korean chaebols are Samsung, LG Group, LG, Hyundai Kia Automotive Group, Hyundai Kia and SK Group, SK. The era of Licence Raj (1947–1990) in India created some of Asia's largest conglomerates, such as the Tata Group, Kirloskar Group, Larsen & Toubro, Mahindra Group, Sahara India, ITC Limited, Essar Group, Reliance Anil Dhirubhai Ambani Group, Reliance ADA Group, Reliance Industries Limited, Reliance Industries, Aditya Birla Group and the Bharti Enterprises. In Brazil the most important conglomerates are J&F Investimentos, Odebrecht, Itaúsa, Camargo Corrêa, Votorantim Group, Andrade Gutierrez, and Queiroz Galvão. In New Zealand, Fletcher Challenge was formed in 1981 from the merger of Fletcher Building, Fletcher Holdings, Challenge Corporation, and Tasman Pulp & Paper, in an attempt to create a New Zealand-based multi-national company. At the time, the newly merged company dealt in construction, building supplies, pulp and paper mills, forestry, and oil & gas. Following a series of bungled investments, the company demerged in the early 2000s to concentrate on building and construction. In the Philippines, the largest conglomerate of the country is the Ayala Corporation which focuses on Ayala Malls, malls, Bank of the Philippine Islands, bank, Ayala Land, real estate development, and Globe Telecom, telecommunications. The other big conglomerates in the Philippines included JG Summit Holdings, Lopez Group of Companies, SM Investments Corporation, Metro Pacific Investments Corporation and San Miguel Corporation. In United States, some of the examples are The Walt Disney Company, WarnerMedia and The Trump Organization (see below). In Canada, one of the examples is Hudson's Bay Company. Another such conglomerate is J.D. Irving, Limited, which controls a large portion of the economic activities as well as media in the Province of New Brunswick.


Advantages and disadvantages of conglomerates


Advantages

*Diversification results in a reduction of investment risk. A downturn suffered by one subsidiary, for instance, can be counterbalanced by stability, or even expansion, in another division. For example, if Berkshire Hathaway's construction materials business has a good year, the profit might be offset by a bad year in its insurance business. This advantage is enhanced by the fact that the business cycle affects industries in different ways. Financial Conglomerates have very different compliance requirements from insurance or reinsurance solo entities or groups. There are very important opportunities that can be exploited, to increase shareholder value. *A conglomerate creates an internal capital market if the external one is not developed enough. Through the internal market, different parts of conglomerate allocate capital more effectively. *A conglomerate can show earnings growth, by acquiring companies whose shares are more discounted than its own. In fact,
Teledyne Teledyne Technologies Incorporated is an American industrial conglomerate. It was founded in 1960, as Teledyne, Inc., by Henry Singleton and George Kozmetsky. From August 1996 to November 1999, Teledyne existed as part of the conglomerate Alle ...
, General Electric, GE, and
Berkshire Hathaway Berkshire Hathaway () is an American multinational Multinational may refer to: * Multinational corporation, a corporate organization operating in multiple countries * Multinational force, a military body from multiple countries * Multinational ...

Berkshire Hathaway
have delivered high earnings growth for a time.


Disadvantages

* The extra layers of management increase costs. * Accounting disclosure is less useful information, many numbers are disclosed grouped, rather than separately for each business. The complexity of a conglomerate's accounts make them harder for managers, investors and regulators to analyze, and makes it easier for management to hide issues. * Conglomerates can trade at a discount to the overall individual value of their businesses because investors can achieve diversification on their own simply by purchasing multiple stocks. The whole is often worth less than the sum of its parts. * Culture clashes can destroy value. * Inertia prevents development of innovation. * Lack of focus, and inability to manage unrelated businesses equally well. * Brand#Brand extension and brand dilution, Brand dilution where the brand loses its brand associations with a market segment, product area, or quality, price or cachet. * Conglomerates more easily run the risk of being too big to fail. Some cite the decreased cost of conglomerate stock (a phenomenon known as conglomerate discount) as evidential of these disadvantages, while other traders believe this tendency to be a market inefficiency, which undervalues the true strength of these stocks.


Media conglomerates

In her 1999 book ''No Logo'', Naomi Klein provides several examples of mergers and acquisitions between media companies designed to create conglomerates for the purposes of creating synergy between them: *WarnerMedia included several tenuously linked businesses during the 1990s and 2000s, including Internet access, content, film, cable systems and television. Their diverse portfolio of assets allowed for cross-promotion and economies of scale. However, the company has sold or spun off many of these businesses – including Warner Music Group, Warner Books, AOL, Time Warner Cable, and Time Inc. – since 2004. *Clear Channel Communications, a public company, at one point owned a variety of TV and radio stations and billboard operations, together with many concert venues across the United States, U.S. and a diverse portfolio of assets in the United Kingdom, UK and other countries around the world. The concentration of bargaining power in this one entity allowed it to gain better deals for all of its business units. For example, the promise of playlisting (allegedly, sometimes, coupled with the threat of blacklisting) on its radio stations was used to secure better deals from artists performing in events organized by the entertainment division. These policies have been attacked as unfair and even Monopoly, monopolistic, but are a clear advantage of the conglomerate strategy. On December 21, 2005, Clear Channel completed the divestiture of Live Nation, and in 2007 the company divested their television stations to other firms, some which Clear Channel holds a small interest in. Live Nation owns the events and concert venues previously owned by Clear Channel Communications. * Impact of conglomerates on the media: The four major media conglomerates in the United States are The Walt Disney Company, Comcast, WarnerMedia and ViacomCBS. The Walt Disney Company is linked with the American Broadcasting Company (ABC), creating the largest media corporation, with revenue equal to roughly thirty six billion dollars. Since Walt Disney owns ABC, it controls its news and programming. Walt Disney also acquired most of Fox, for over $70 billion. When
General Electric General Electric Company (GE) is an American multinational Multinational may refer to: * Multinational corporation, a corporate organization operating in multiple countries * Multinational force, a military body from multiple countries * Mult ...
owned NBC, it did not allow negative reporting against General Electric on air (
NBCUniversal NBCUniversal Media, LLC, traded as NBCUniversal (formerly known as NBC Universal, Inc. from 2004 to 2011), is an American multinational Multinational may refer to: * Multinational corporation, a corporate organization operating in multiple countr ...
is now owned by Comcast). Viacom's chief executive, Sumner Redstone, considers himself a “liberal democrat” and most of Viacom's programming has a liberal perspective. Viacom merged with CBS in 2019 as ViacomCBS after originally merged in 1999 with Viacom as the surviving company while also Viacom divested CBS in 2005 due to FCC regulations as the time. * Media conglomerate impact on journalism: It leads to opinionated journalism versus traditional journalism. Opinionated journalism is a journalist adding his or her ideologies on a matter on top of reporting it to the public. The coverage that conglomerates have of issues, especially political, is not necessarily objective, and fails to report both sides of an issue, if not taking a neutral stance. This is known as media bias. Media bias is ”the intentional or unintentional slanting of news reporting toward one side due political views or cultural beliefs of journalists, producers or owners of a media outlet.


Internet conglomerates

A relatively new development, Internet conglomerates, such as Alphabet Inc., Alphabet, Google's parent company belong to the modern media conglomerate group and play a major role within various industries, such as brand management. In most cases Internet conglomerates consist of corporations who own several medium-sized online or hybrid online-offline projects. In many cases, newly joined corporations get higher return on investment, returns on investment, access to business contacts, and better rates on loans from various banks.


Food conglomerates

Similar to other industries there are many companies that can be termed as conglomerates. * The Altria, Philip Morris group, which once was the parent company of Altria group, Philip Morris International, and Kraft Foods had an annual combined turnover of $80 bn. Although Phillip Morris International and Kraft Foods were spun off to independent companies. *Nestlé


See also


References


Bibliography

* * McDonald, Paul and Wasko, Janet (2010), ''The Contemporary Hollywood Film Industry'', Blackwell Publishing Ltd.


External links


"Conglomerate".
Encyclopædia Britannica. 2007. Encyclopædia Britannica Online. 17 November 2007.

An example of how conglomerates were used in the 1960s to manufacture earnings growth {{DEFAULTSORT:Conglomerate (Company) Types of business entity Conglomerate companies,