3.1 - Integration: Conglomerate Flashcards
What does conglomerate integration entail?
A merger involving firms within entirely different markets + production chains
Define conglomerate
Individual body with ownership of a large number of diversified businesses
What are the specific advantages of conglomerate integration?
Spreads risk
Allows broader spread of ideas
Introduces growth outlets in new markets
Cross subsidisation
What are the specific disadvantages of conglomerate integration?
Chances of mismanagement and overpricing rise
Focus shifts from core business to new enterprise
Difficult to merge cultural values, employees across industries
How does conglomerate integration spread risk?
Reduced vulnerability to losses in one area
Less reliance on sole products
How does conglomerate integration introduce new growth outlets?
Firm may not have requisite finances/opportunities to grow in its current market
How does conglomerate integration increase the risk of mismanagement?
Interference in firms/markets without any experience
Risk of overpricing
