the advantages and disadvantages of a conglomerate in economics?

Question

10 points thanks.

Answer 1

None of the arguments advanced by corporate executives as a justification for having a conglomerate pan out in practice. There is a well-known phenomenon of "conglomerate discount"; conglomerates trade at a lower price than their constituent businesses would fetch if they were independent. Break-up of conglomerates (especially if undertaken voluntarily without pressure from shareholders) usually results in significant gains to shareholders.

The primary disadvantage of conglomerates is the fact they are conglomerates. Multiple (often unrelated) businesses compete for limited resources, including capital and managerial attention. Capital structure of any constituent business cannot be optimized, because debt capacity is always cut to the lowest common denominator. The list goes on and on...

Answer 2

Advantages Of Conglomerate

Answer 3

Increasing deficit and government spending can be harmful to the economy. Governments often borrow money to pay for subsidies. This drives up interest rates and pushes some businesses out of market. This causes businesses to cut back on spending. The cut would then mean less production. Falling production leads to lower supply for unchanging demand. Inflation occurs. Long story short, increasing government spending for too long lowers economic growth and causes inflation. Sometimes government aid can be beneficial though. The Federal Reserve's monetary policy, for example, has helped control fluctuations in the business cycle. It has done wonders in curbing inflation and stimulating or reducing business spending. These actions help ensure that the economy does not experience large recessions or depressions.

Answer 4

advantage - cost savings from concentrating certain administrative tasks (HR, payments, accounting) in the central office

disadvantage - more complicated chain of command, loss of flexibility