Conglomerate

A conglomerate is a business that operates in more than one market. Usually conglomerates produce and sell many dissimilar PRODUCTs for different markets. Unlike VERTICAL INTEGRATION, in which a firm expands by acquiring or establishing company-owned operations at different stages of the production process; or horizontal integration, a combination of firms at the same level of COMPETITION, conglomerates represent corporate expansion into diverse areas, levels, and markets. Conglomerates are typically created by multiple mergers of previously independent companies. In the United States, the creation of conglomerates was quite popular in the 1960s and again in the 1990s. In the 1960s, the economic logic for creating conglomerates was that a well-established MANAGEMENT team could efficiently operate many different types of businesses. Management efficiency would increase PROFITs and SHAREHOLDER value. During the 1990s, the sudden creation of CAPITAL by DOT-COM companies via INITIAL PUBLIC OFFERINGs allowed these companies to purchase many other similar and dissimilar firms. Company executives often cite SYNERGY and mutual benefits when creating conglomerates. Many Japanese corporations, including Mitsubishi and NEC, are considered conglomerates. U.S. companies such as Raytheon, United Technologies, and Disney are examples of conglomerates. Legal challenges to conglomerates focus on the potential for reduced competition. Reciprocal trade agreements among member units in a conglomerate can limit the access of outside competitors. Conglomerate control of newspaper, radio, and television companies has raised fears of corporate censorship of journalists fearful of reporting negative news about their parent organization.