Answer to Question #266375 in Economics for Nalyn

Question

Is conglomeration beneficial to society and economics? Explain your answer.

Answer 1

The main advantage of the corporations is to increase profits and reduce risks. This is facilitated by diversification - the introduction of investments in various areas of economic activity.

If the production of the conglomerate has ceased to generate income and become unprofitable, then it is closed. Funding is moving into an area that is on the rise of development. As a result, the consolidation will help prevent losses. Other pluses of the concern in the form of a conglomerate:

The reliability of the economic environment is increasing.

The cumulative effect of interaction prevails. The result from each individual company in the end will not be as powerful, which is not to say about the achieved profit of the combined enterprises.

The ability to actively introduce innovative technologies and scientific achievements into production activities.

There is an opportunity to join organizations that operate in developing areas and get rid of unpromising assets.

An advantage appears in the formation of new assets. The acquired firm buys shares, it is more powerful than any company that started from scratch.