A conglomerate is a tight control in order to increase profits

A conglomerate is an organizational form.enterprise integration, uniting a network of heterogeneous companies under a single financial control. When companies are merged, vertical and horizontal integration, as well as production commonality, do not matter. A conglomerate is the direct result of a merger of various firms.

Conglomerates and concerns: what is the difference?

A concern is a financial conglomerate that has arisen in a very short time as a result of the absorption of a certain number of independently functioning firms.

Nowadays, increasinglytransnational concerns, but only in developed countries. Their main goal is to accumulate lower profits in high tax countries and get good profits in low countries. Transnational concerns are controlled by entrepreneurs of the same country, while multinational concerns imply international distribution of capital.

Features

The merged companies do not have targeted and technological unity with the main field of activity of the integrator.

Profiling production in such associationseither becomes indistinct, or disappears altogether. A conglomerate is a combined company that maintains production, economic and legal independence, but is financially completely dependent 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 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

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

• providing a spacious economic base;
• high-quality forecasting of changes in the structures of industries and markets;
• access to important new technologies and resources;
• the possibility of cheap purchases and expensive sales;
• a chance to improve the image of the leadership of the organization;
• the desire of management to increase their own income;
• get a synergistic effect.

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

Famous examples

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

For example, the main specialization of the company Hanson -acquisition of technologically simple 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 the management staff, ensuring that they do not go beyond the planned budget. Exceptionally thanks to strict control methods and cost-saving measures, the conglomerate achieves excellent results from the once unprofitable enterprises.