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SEVEN RULES: Seven key economic principles underlying the study of economics and the operation of the economy. These seven rules are: first -- scarcity, second -- subjectivity, third -- inequality, fourth -- competition, fifth -- imperfection, sixth -- ignorance, and seventh -- complexity.
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CONGLOMERATE MERGER: The consolidation of two or more separately-owned businesses, operating in separate industries, into a single firm. This is one of three types of mergers. The other two are horizontal merger--two competing firms in the same industry that sell the same products--and vertical merger--two firms in different stages of the production of one good, such that the output of one business is the input of the other. A conglomerate merger arises when two or more firms in different markets producing unrelated goods join together to form a single firm. An example of a conglomerate merger is that between an athletic shoe company and a soft drink company. The firms are not competitors producing similar products (which would make it a horizontal merger) nor do they have an input-output relation (which would make it a vertical merger).A number of major U.S. corporations have expanded their activities over the years through conglomerate mergers. General Electric provides an excellent real world example. In the hypothetical world of Shady Valley, OmniComglomerate, Inc. offers an example of how a firm can expand through conglomerate mergers. Beginning its existence as OmniMotors, it focused exclusively on the production of automobiles. However, it expanded and diversified through conglomerate mergers with such firms as The Acme Sundial Company, which manufactured sundials; Tasty Cola Drinks, which produced soft drinks; Bank of the World, which offered banking services; and Mobility-Plus, which provided wireless telephone services. Conglomerate mergers are considered relatively harmless when it comes to inefficiencies that result from market control. Because a conglomerate merger is between two firms in different industries, the degree of competition within EACH industry is largely unaffected. Suppose, for example, that The Master Foot Company, a leading manufacturer of athletic shoes, merges with Juice-up, a soft drink firm. The resulting company (call it Juicy Foot) is faced with the same competition in each of its two markets after the merger as the individual firms were before the merger. The Master Foot division of Juicy Foot must still compete with its arch rival OmniRun. And the Juice-Up division of Juicy Foot must still compete with OmniCola, King Caffeine, Frosty Grape, and others in the soft drink market. While conglomerate mergers tend to be relatively harmless, they can set the stage for problems. If several different markets are dominated by divisions owned by two large conglomerates, the potential for collusion is greater. Suppose, for example, that OmniConglomerate, Inc. controls OmniRun in the athletic shoe market, OmniCola in the soft drink market, OmniCell in the wireless telephone market, and OmniMotors in the automobile market. Also suppose that another conglomerate, Juicy Foot, controls Digital Distance in the wireless telephone, market and Mega Mobile in the automobile market, in addition to Juice-Up in the soft drink market and Master Foot in the athletic shoe market. With so much competition between Juicy Foot and OmniConglomerate in several different markets, the incentive to cooperate rather than compete is much greater.
Recommended Citation:CONGLOMERATE MERGER, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: April 27, 2024]. Check Out These Related Terms... | | | | | | | Or For A Little Background... | | | | | | | | | | | | | And For Further Study... | | | | | | | | | | Related Websites (Will Open in New Window)... | | |
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PINK FADFLY [What's This?]
Today, you are likely to spend a great deal of time lost in your local discount super center wanting to buy either a 50 foot extension cord or a combination CD player, clock radio, and telephone (with answering machine). Be on the lookout for mail order catalogs with hidden messages. Your Complete Scope
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General Electric is the only stock from the original 1896 Dow Jones Industrial Average remaining in the current index.
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"Nothing is a waste of time if you use the experience wisely. " -- Auguste Rodin, Sculptor
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JGB Japanese Government Bond
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