Disadvantages of combinations

Advantages of combinations.

Conglomerate Combinations

A merger between two or more companies producing or marketing different products is a conglomerate combination. While horizontal and vertical combinations have been com­mon since the mid-1800s, conglomerate combinations did not become common until the 1960s and 1970s.

The classic example of a conglomerate is the International Telephone and Telegraph Corporation (ITT). Until the 1950s ITT manufactured only telecommunications equipment. During the 1960s and 1970s, however, ITT acquired hun­dreds of subsidiaries - acquired companies that have not been forced to abandon their corporate identities.

Today ITT owns companies in more than 80 countries and is involved in such varied enterprises as in production of frozen foods and plumbing supplies and in operation of com­puter services, consumer finance companies and hotels.

Trends in Corporate Combinations

The trend toward conglomerate combinations began in the 1960s and carried into the 1970s. Conglomerate mergers helped to build corporate empires for ITT, Gulf & Western, and many other major producers. During the 1980s, however, a trend toward vertical and horizontal combinations redevel­oped. Companies in the 1980s tended to merge with other com­panies that produced the same or related goods or services.

One of the major business advantages of corporate mergers is efficiency. By centraliz­ing decision making within an industry, corporate combina-Jions, especially horizontal and vertical combinations, can increase efficiency. Costs also can be cut by eliminating unnecessary or overlapping jobs and departments.

A second business advantage of mergers is that buying an existing business is often far less expensive than building new plants, hiring new employees, or acquiring additional capital in order to expand. In most mergers, the acquiring corporation obtains additional capital resources and experi­enced management and employees.

A third business advantage of mergers is that the increased size of merged corporations often makes it possible to borrow more capital. This additional capital can be used for such improvements as enlarging the sales force or moderniz­ing production facilities. In general, larger corporations also are able to compete more effectively in the marketplace.

Corporate combinations may result in disadvantages for the merged corporation stockholders and consumers. Corporate mergers sometimes have negative consequences for the merged corporations, both from the standpoint of corporate performance and from the standpoint of worker satisfaction.

In some instances, especially in conglomerates, the man­agers of merged corporations may not have the necessary skills to supervise the production of newly acquired goods. and services. Lack of supervisory skills can result in decreased efficiency and profits.

Mergers also may result in added unemployment because of changes in business operations. Employees may be reshuf­fled and some people may be laid off. The employees who stay on the job sometimes suffer from low morale due to altered job descriptions or other negative changes that occur in the workplace. While mergers usually are beneficial for stock­holders in the acquired company, almost half of all major mergers in the United States result in a decrease in the value of the purchasing corporation's stock. For consumers, one of the major disadvantages of corporate mergers is that they often lead to decreased competition in the marketplace. This lack of competition may result in higher prices for con­sumers. It also may limit the choices available to consumers by reducing the number of competing goods and services.

Words and Expressions

abandon v - покидать, отказываться, прекращать

absorb v - поглощать, всасывать

acquisition n - приобретение, поступление

charter v - давать привилегию

coal mine - угольная шахта

conglomerate combination - конгломератное объединение

corporate merger - корпорационное слияние

corporate performance - совместное функционирование

corporation n — корпорация, объединение, акционерное общество

efficiency n - продуктивность, производительность

horizontal combination - горизонтальное объединение

identity n - индивидуальность; своеобразие; особенность

iron mine - шахта по добыче железной руды

lay off v - увольнять

■ merger n - слияние, объединение

ore deposit - залежи руды

production of frozen foods - производство полуфабрикатов

refinery n - нефтеочистительный завод

related goods - взаимосвязанные товары

reshuffle v - перегруппировывать, менять местами

sales force - продавцы, торговые агенты

steel mills - сталелитейные заводы

vertical combination - вертикальное объединение

Дата добавления: 2014-12-29