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Last updated 14 Mar 2023
The nature of and examples of conglomerate integration as a form of external business growth is covered in this short revision video.
Conglomerate integration refers to the process by which a company expands its operations into unrelated business areas or industries. Here are some potential advantages of conglomerate integration:
- Diversification: By diversifying its operations across different industries, a company can spread its risk and reduce its dependence on any one particular market or product. This can help to protect the company against downturns in any one industry.
- Increased revenue: Conglomerate integration can lead to increased revenue by expanding the company's customer base and market share. By entering into new markets and industries, the company can tap into new sources of revenue.
- Economies of scale: Conglomerate integration can lead to economies of scale by allowing the company to share resources and reduce costs. For example, the company may be able to share administrative expenses, research and development costs, and marketing expenses across different business units.
- Cross-selling opportunities: Conglomerate integration can create cross-selling opportunities by allowing the company to leverage its existing customer base to sell new products or services. For example, a company that sells computer hardware may be able to cross-sell software or other related products to its existing customers.
- Flexibility: By having operations in different industries, a company can be more flexible and adaptable to changes in the market. If one industry experiences a downturn, the company can shift its focus to other areas that are more profitable.
It's important to note that conglomerate integration can also have some potential disadvantages, such as increased complexity and difficulty in managing a diverse range of business units. As with any business decision, it's important for companies to carefully weigh the potential advantages and disadvantages before pursuing conglomerate integration.