Table of Contents
What are the advantages and disadvantages of a conglomerate?
Advantages and disadvantages of conglomerates
- Diversification results in a reduction of investment risk.
- A conglomerate creates an internal capital market if the external one is not developed enough.
- A conglomerate can show earnings growth, by acquiring companies whose shares are more discounted than its own.
What is conglomerate merger example?
A conglomerate merger is “any merger that is not horizontal or vertical; in general, it is the combination of firms in different industries or firms operating in different geographic areas”. One example of a conglomerate merger was the merger between the Walt Disney Company and the American Broadcasting Company.
What are 2 disadvantages of mergers?
Disadvantages of a Merger
- Raises prices of products or services. A merger results in reduced competition and a larger market share.
- Creates gaps in communication. The companies that have agreed to merge may have different cultures.
- Creates unemployment.
- Prevents economies of scale.
Does conglomeration increase diversification?
Conglomerate diversification is growth strategy that involves adding new products or services that are significantly different from the organization’s present products or services. Conglomerat diversification occurs when the firm diversifies into an area(s) totally unrelated to the organization current business.
What are the disadvantages of bank mergers?
Disadvantage of Merging Banks Mergers may make it difficult for private banks to gain faster market share as most anchor banks are large. Chances of Bank going Bankrupt. Risk of fraud and robberies. Risk of public debt.
What is the advantages of conglomeration?
Advantages. Despite its rarity, conglomerate mergers have several advantages: diversification, an expanded customer base, and increased efficiency. Through diversification, the risk of loss lessens. If one business sector performs poorly, other, better-performing business units can compensate for the losses.