conglomerate, in business

conglomerate, corporation whose asset growth, often very rapid, comes largely through the acquisition of, or merger with, other firms whose products are largely unrelated to each other or to that of the parent company. Merger to gain monopoly (“horizontal integration”) was notable at the end of the 19th cent.; somewhat later, acquisition of suppliers or buyers (“vertical integration”) became fairly common. Conglomerates did not emerge until the 1960s, when they quickly became popular among investors. Their stock prices often rose (and sometimes fell) spectacularly. Economic advantages attributed to the conglomerate include protection against overspecialization, availability of management expertise, and reduced costs, but they have also been criticized as organizationally inefficient and for wasting capital in acquisition instead of production. The rise of the conglomerate in the 20th cent. has been attributed to restrictions imposed by antitrust laws: As businesses were constrained within their own industry, they instead expanded into different markets. This trend greatly intensified during the 1980s and 1990s (see merger); a notable exception was ITT, which split up (1995) its companies to strengthen operations. The mid-2000s again saw the breakup of a number of conglomerates, most notably Cendant and Viacom, when shareholders seemed to favor more focused companies over larger companies with disparate businesses, but other conglomerates, such as Berkshire Hathaway, continued to thrive and grow.

The Columbia Electronic Encyclopedia, 6th ed. Copyright © 2024, Columbia University Press. All rights reserved.

See more Encyclopedia articles on: Businesses and Occupations