Historical Dictionary. The meaning of the word "conglomerate" Conglomerate designation

Hello, dear readers of the blog site. The variety of foreign words in the Russian language dictates the need for their precise interpretation.

Today we will analyze one of these multifunctional concepts - the term “conglomerate”. What is it and in what areas is this concept applied.

The concept of a conglomerate - what is it?

Like many terms, the word “conglomerate” is of Latin origin. Literally translated, “conglomeratus” means “ crowded, collected».

A broader interpretation of the translation: a conglomerate is the union of any heterogeneous objects into a single whole.

Situations in which such a union occurs occur in the most various areas. Candies with different fillings placed in one box are called assorted, but this delicious combination can also be called a conglomerate (however, “assorted” is a more beautiful name for a candy mixture).

Another example is that during a discussion a conglomerate of opinions arises. And, of course, this is how they designate one of the five main ones, most of which we already know:

concern
conglomerate

Conglomerate in economics

In the economic sphere, this is a form of integration (unification) of companies.

The essence of an economic conglomerate is this is an association of companies operating in different industries, legally independent from each other, under unified financial control. Conglomerates can unite companies within one state or across several countries (transnational concerns).

What does it mean? Imagine a large tree: in order for leaves to appear, the roots need to receive nutrients and water from the ground, and then this mixture turns into juices and reaches the branches along the trunk, causing buds to appear and leaves appear from them.

vertical concern: many enterprises carry out a single production cycle under general management at its different stages (from the purchase or extraction of raw materials to the sale of products to consumers).

An example is the Lukoil company. She carries out a single chain technological stages: exploration of hydrocarbon deposits (oil and gas) → extraction of raw materials → transportation → processing → sale to wholesale and retail customers.

Concern horizontal type unites companies engaged in the production of the same range of products, but for a different contingent of consumers. Example - a brewing company producing different cities and countries different types of beer.

Concern, uniting signs of a vertical and horizontal structure are called mixed, otherwise a conglomerate.

The formation of a conglomerate occurs through absorption small firms different industry focus by a large company or a merger of equal companies. As a rule, the acquired companies do not have any common links with each other (production, sales, etc.).

Example - American company " General Electric", engaged in the production of equipment, power plants, medical equipment, small arms and even nuclear warheads.

Advantages of conglomerate concerns

The main advantage of creating conglomerates is maximizing profits and minimizing risks. This is achieved by investing in various areas of economic activity.

For example, one of the various production facilities of a conglomerate, for some reason, stopped making a profit and became unprofitable. This production is closed, and funding is redirected to the industry, which is currently on the rise. In this way, the association can protect itself from losses.

Other Advantages concern in the form of a conglomerate:

summing economic effect interactions (much more powerful than the effect of each individual company;
strengthening the reliability of the economic foundation;
the possibility of actively introducing innovative achievements of science and technology into production;
possibility of joining companies operating in actively emerging industries and directions, and disposal (sale) of (unpromising and unclaimed) assets. The more liquid assets, the greater the opportunity to attract borrowed funds;
economic benefit when creating new assets: purchasing shares of the acquired company versus creating any enterprise from scratch.

Conglomerates in geology

Geology is the science of the structure and development of planet Earth, based on research rocks. The composition, structure, age of geological samples gives an idea of the development of our planet.

Rocks are a collection of minerals. Rocks are classified depending on the amount of minerals they contain and are divided into 2 types:

Monomineral - contains only one type of mineral.
Polymineral – several different minerals are present.

One of the forms of polymineral rocks are conglomerates.

These are samples consisting of 3 components:

rounded stones ranging in size from 1 to 15 cm;
rocks of smaller fractions (up to 1 cm), for example, sand;
binder (natural cement - chemical compounds of minerals with oxygen, carbon and hydrogen).

Conglomerates can be different in composition (polymict), as in the photo above, and homogeneous in composition (monomictic), as in the photo below.

This is a concept in medicine

A conglomerate, from a medical point of view, is a combination of any cells or tissues into a single whole.

For example, a lymph node conglomerate is formed if the lymph nodes increase in size and connect to each other. , dangerous due to the possibility of degeneration into a malignant tumor or compression of organs located next to this collection of lymph nodes.

Another medical example: adhesive conglomerate - the connection of multiple adhesions after surgery into a dense structure.

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Effective principle of association

If we turn to the meaning of this form of cooperation, we will find out that a conglomerate is a scheme for organizing activities various companies, in which the integration of several legal entities with unified financial control. Such an association is usually the result of an acquisition or merger.

In fact, this means that one company or holding owns a large number of diversified firms, including those that do not have a common production unit. Such integration can occur both horizontally and vertically.

Expanding the meaning of the word conglomerate, it is worth noting the fact that the company exercising financial control of the association may look modest in comparison with the firms that are part of the network. The peculiarity of such small holdings is that they have sufficient potential for effective management and financing, and therefore are dominant.

Reasons for appearance

This form of monopoly, such as integration under a single financial management, began to actively develop in the late 50s of the twentieth century on the territory of capitalist states. Conglomerates quickly became popular because they allowed them to effectively accumulate capital at a time when many companies were experiencing an industry crisis.

The value of this strategy lies in the fact that the dominant holding can go beyond its own activities and invest in new promising areas that are engaged in by firms that have become part of the structure. This allows monopolies to significantly reduce the risk of loss of profit and receive high income from the development of modern industries.

Key features of the interconnected network

Considering that a conglomerate is an organizational form in which various companies are effectively integrated, the principle of operation of such a structure is especially interesting.

The features of such a network are as follows:

Companies that merge under the financial leadership of a specific holding often retain their production and legal autonomy, but are completely dependent on its investments;

In most cases, a conglomerate is a structure in which there is no predominant sphere of production, in other words, there is no focus on a specific profile of activity;

For an effective control system, the dominant holding uses various financial and economic management tools, which have an indirect nature of regulating the activities of firms;

In most cases, a merger is rarely financed by one firm; a conglomerate often develops on the basis of the resources of several investment companies in addition to the pure holding company.

This organizational principle has proven its effectiveness and has allowed many small industries get necessary resources, which were not previously available to them. Holdings, in turn, through a monopoly based on integration, open up profitable and safe investment opportunities.

Types of conglomerates

If we pay attention to the various forms of merger in many civilized countries, we will notice that they have some differences.

For example, in Western Europe, a conglomerate is an integration form in which companies are required to have a certain relationship in the direction of production development.

Overseas experience

If you pay attention to the United States, you will see the opposite approach to the issue of merging companies: American structures based on the principle of merger under the management of a specific holding company do not emphasize the commonality of activities of different companies.

In essence, a conglomerate in the United States refers to large concerns that absorb a large number of companies in a short period of time. At the moment there are monopolies that combine production capacity on several continents.

Vivid examples of successful integration

Modern history knows many cases when such a management scheme as the integration of firms with different profiles of activity into a structure under a single financial management was successfully used.

When studying successful examples of conglomerates, it is worth paying attention to the British company Hadson pic., which included more than 600 subsidiaries in many countries around the world.

The management of this business giant used the following strategy: they acquired conglomerates that were no longer actively operating, after which they began to sell each company separately. The idea was that selling off firms that were part of the structure would bring more money than was spent on acquiring the monopoly.

Currently, shares of 40 companies that are officially recognized as conglomerates are traded on the New York Stock Exchange. These include Phillips Electronics, Montedison, General Electric, Hanson, United Technologies, Textron Inc. and others.

An interesting fact is that in the conditions of the modern market, these conglomerates have changed the priorities in their activities, placing emphasis on the development and acquisition of those enterprises that are developing in their key areas.

Reasons for the decline in profitability of monopolies

In fact, the possibility of obtaining excess profits is the main reason why such a form of integration of various firms as a conglomerate still exists. A company that assumes financial control initially expects the most profitable investment. But this does not change the fact that at the moment there is a significant decrease in the profits of many monopolies, and there are objective reasons for this.

First of all, the efficiency of conglomerates is reduced due to excessive diversification, which leads to a significant loss of product quality and, as a consequence, low competitiveness.

An insufficiently competent system of motivation for personnel of companies that are part of a monopoly also plays a negative role.

Another obstacle to stable and high profits is the constant initiative on the part of many firms to increase their transfer costs. As a result, the products of most companies owned by the central holding are too expensive to successfully compete in the market. modern market. Moreover, the parent company constantly has to deal with claims regarding the fairness of determining the transfer price of a particular company.

We must not forget about the high cost of many industries that become the target of conglomerates: many of them require significant investments. In addition to the fact that the firms themselves can be very expensive, a monopoly is often forced to provide financial compensation to shareholders who have lost the ability to control the acquired company.

Considering that many enterprises that are part of a conglomerate have different profiles of activity, their high cost only complicates the process of increasing profits.

Conclusion

We can draw the following conclusion: those monopolies that operate today have a chance for a successful future only if they have a highly qualified team of top managers capable of competently drawing up and implementing a development strategy for the conglomerate.

Efforts went along the way of production homogeneous products (horizontal integration), technologically related industries (vertical integration according to the scheme: production - production - sales). Now simple structures for the production and sale of technologically non-technological products have begun to unite. related products, i.e. it's about expanding the range economic activity, or diversification of production. The benefits of diversification are well known. This is the possibility of reorienting funds from industries experiencing decline to industries that are on the rise (and vice versa) based on the use of the difference in capital turnover of various industries, and mitigating seasonal fluctuations in sales, reducing costs, etc.

Conglomerate- organizational form of integration of companies, uniting under a single financial control a whole network of heterogeneous ones, which arises as a result of the merger of various firms, regardless of their horizontal and vertical integration, without any industrial community.

In the USA, conglomerates are called conglomerates that arise in a very short time during the absorption large quantity firms that are functionally independent from each other.

IN last years in developed countries are formed transnational concerns. Their goal is to earn high profits in countries with low tax rates, and to accumulate smaller profits in countries where taxes are high.

Transnational concerns are owned or controlled by entrepreneurs of one country, and multinational concerns have international capital distribution (General Motors).

Features of conglomerates:

integration within this organizational form enterprises of various industries without the presence of a production community. The merged companies have neither technological nor target unity with the main field of activity of the integrator company. Core production in conglomerate-type associations takes on a vague outline or disappears altogether;
the merged companies, as a rule, retain legal, production and economic independence, but are completely financially dependent on the parent company;
significant decentralization of management. Divisions of conglomerates enjoy significantly greater freedom and autonomy in all aspects of their activities compared to their peers. structural divisions traditional diversified concerns;
financial and economic methods act as the main levers for managing conglomerates; the holding company at the head of the conglomerate indirectly regulates the activities of the divisions;
As a rule, a special financial core is formed in the structure of the conglomerate, which, in addition to the holding (pure holding), includes large financial and investment companies.

This form of integration has its own characteristics in different countries. Thus, conglomerates in the United States do not imply absolutely no production community between the companies being united, while in Western European countries, enterprises are in a certain relationship in the production process.

Examples of conglomerates include, in particular, Mitsubishi, Raytheon, BTR, Hanson. Hanson, for example, specializes in acquiring technologically simple businesses in stable market sectors. Hanson strives to reduce production costs in the acquired company and strictly controls the work of managers, making sure that they fit within the allotted budget. Through strict austerity and control measures, the conglomerate is achieving excellent results from once unprofitable businesses.

The main way to form conglomerates is the merger and acquisition of firms with different industrial and commercial orientations.

The boom of large diversified companies, i.e. conglomerates, as already noted, occurred in the 60s. last century, although large conglomerates were created back in the 20s. But then their creation was initiated by the tasks of militarization of the economy. In the 60s, their development took place on a purely commercial basis.

The main motives for conglomerate mergers and acquisitions of companies were:

obtaining a synergistic effect;
providing a broader economic basis;
the ability to buy cheap and sell high;
forecasting changes in the structure of markets or industries;
desire to improve the image of the company's management;
aspiration of the highest management personnel increase your income, taking into account the use of options as a means of long-term incentive;
focus on access to new important resources and technologies.

In the 70s active work large companies their diversification continued and was associated with the desire to acquire assets in the fields of electronics and telecommunications.

But in the 80s. Conglomerate profits began to decline steadily. Companies that were part of conglomerates performed worse than independent companies in the same industries, and new acquisitions brought only colossal losses. According to Michael Porter's calculations, in the first half of the 80s. Conglomerate takeovers of companies in unrelated industries failed 74% of the time.

Among the companies whose shares are currently traded on the New York Stock Exchange, forty companies are officially classified as conglomerates. These include such well-known companies as General Electric, American conglomerates Textron Inc and United Technologies Corp, British Hanson, Dutch Philips Electronics, Italian Montedison, etc. But all these conglomerates have refocused their activities on those segments in which they are leaders. They are currently acquiring companies in core areas and selling all non-core assets.

There is a decline in the profitability of conglomerates in our time. Experts name the following as the main problems that arise during the functioning of conglomerates:

Excessive diversification, as a result of which there is a gradual but steady decline in the competitiveness of goods and services produced by companies.
Sub-optimization: within integration forms, the desire to strengthen intra-group cooperative ties usually prevails, despite the weak technological commonality between the companies included in the conglomerate. Moreover, each company naturally strives to set the most favorable transfer price for itself. As a result, the output products become very expensive and uncompetitive, and mutual claims regarding the level of transfer prices are constantly resolved by the parent company of the conglomerate.
Motivation of the management personnel of companies included in the conglomerate in the order of their takeover: the effectiveness of the work of managers can be irreversibly affected by a change of owner or their transformation from owners to employees.
Significant funds required to acquire a target company: in addition to payment market value the company often requires the payment of a bonus to shareholders for the loss of control over the acquired company, the payment of an amount for vesting management team so-called “golden parachutes” so that they quickly leave the company without causing too much harm to it. As a result, huge amounts of money invested in acquisitions of companies in unrelated industries often only lead to a decrease in the efficiency of the conglomerate as a whole.

The life of a conglomerate largely depends on the level of qualifications of senior management personnel. The absence of qualified senior managers in the management apparatus is tantamount to its “death.” The validity of this statement is illustrated by the spectacular failures of such seemingly successful conglomerates as Textron, Polly Peck and Maxwell Communications. Although this statement is also true for other macrostructures.

All dictionaries Ushakov's Dictionary Political science: Dictionary-reference book Modern economic dictionary. 1999 Terminological Dictionary of Banking and Financial Terms Dictionary of Economic Terms Thesaurus of Russian Business Vocabulary Encyclopedic Dictionary Ozhegov Dictionary Efremova Dictionary Brockhaus and Efron Encyclopedia Dictionary living Great Russian language, Dal Vladimir Bolshoi legal dictionary

Ushakov's Dictionary

conglomerate

conglomera t, conglomerate, husband. (lat. conglomeratus - crowded) ( books).

1. Unsystematic connection of dissimilar parts and objects ( in contrast harmonious combination). This is not a theory, but simply a conglomeration of different opinions.

2. A rock consisting of dissimilar individual pieces cemented by some other homogeneous rock ( geol.).

Political Science: Dictionary-Reference Book

conglomerate

one of modern forms economic associations. Originated in the 1960s. (mainly in the USA). The formation of a conglomerate occurs through functional mergers (the merger of firms related in the production process) or through investment mergers (the merger of firms without a production community).

Modern economic dictionary. 1999

conglomerate

(from lat. conglomeratus - collected)

decentralization of management.

Terminological dictionary of banking and financial terms

conglomerate

A company whose scope of activities includes two or more unrelated types of business activities.

Dictionary of economic terms

conglomerate

(from Latin conglomeratus - collected)

one of the forms of union, an association of diversified firms operating in different sectors of the market. In a conglomerate, a high degree of independence of its member firms and decentralization of management are maintained.

Thesaurus of Russian business vocabulary

conglomerate

Syn: cluster, mass

encyclopedic Dictionary

conglomerate

Efremova's Dictionary

conglomerate

Encyclopedia of Brockhaus and Efron

conglomerate

This is a clastic rock of sedimentary origin, which consists of rounded or partly rounded fragments, the so-called pebble, one or more rocks connected by some intermediate mass of hydrochemical origin; this mass is called cement. The size of pebbles can reach the size of a human head and even much larger; on the other hand, when the size of pebbles is reduced to the size of grains of sand, rocks transitional from sandstone to sandstone are obtained. The shape of the pebbles is K. transitional to breccias. If the K. pebbles all belong to the same breed, then the K. is called monogenic, but if they are different, then it is called polygenic. In addition, stones are also distinguished by the composition of pebbles, for example, siliceous, granite, and greenstone stones; by the nature of the cement, for example, calcareous, ferruginous, clayey, etc. C. are found in sediments of all systems, where they are coastal formations and often occur at the border of two systems, departments, formations or other stratigraphic units. From K. the following deserve special mention: nagelflu - tertiary alpine climate, which enjoys significant development in the Swiss Alps and the Caucasus; it consists of fragments of Jurassic sandstones and limestones, as well as various crystalline rocks, bound by yellow or brown crumb cement; Its interesting feature is the mutual imprints and impressions on the pebbles, attributed partly to mechanical reasons, pressure, and partly to the dissolving activity of water at the points of contact of two pebbles. Pudding(Puddingstone) - English tertiary stone, consisting of multi-colored flint pebbles bound by hard siliceous or hornfels cement. Blue or gold-bearing K. California; The siliceous cement contains pebbles of various crystalline rocks and native gold.

F.L.

Large legal dictionary

conglomerate

(lat. conglameratus - collected) -

Thesaurus of Russian business vocabulary

Conglomerate

Syn: cluster, mass

Terminological dictionary of banking and financial terms

Conglomerate

A company whose scope of activities includes two or more unrelated types of business activities.

Dictionary of economic terms

Conglomerate

(from Latin conglomeratus - collected)

Modern economic dictionary. 1999

CONGLOMERATE

(from lat. conglomeratus - collected)

Political Science: Dictionary-Reference Book

Conglomerate

one of the modern forms of economic associations. Originated in the 1960s. (mainly in the USA). The formation of a conglomerate occurs through functional mergers (the merger of firms related in the production process) or through investment mergers (the merger of firms without a production community).

Efremova's Dictionary

Conglomerate

m. Rock consisting of cemented pebbles mixed with sand and gravel.
m.
1. Mechanical connection of smth. heterogeneous.
2. A modern monopolistic association of enterprises belonging to different economic spheres and not connected by direct production cooperation.

Ozhegov's Dictionary

CONGLOMER A T, A, m.

1. Mechanical connection chegon. heterogeneous, disorderly mixture (book). K. opinions.

2. Clastic rock - pebbles with an admixture of sand, gravel and boulders (special).

| adj. conglomerate, oh, oh.

Ushakov's Dictionary

Conglomerate

conglomera t, conglomerate, husband. (lat. conglomeratus - crowded) ( books).

1. Unsystematic connection of dissimilar parts and objects ( in contrast harmonious combination). This is not a theory, but simply a conglomeration of different opinions.

2. A rock consisting of dissimilar individual pieces cemented by some other homogeneous rock ( geol.).

encyclopedic Dictionary

Conglomerate

one of the modern forms of economic associations. Originated in the 1960s. (mainly in the USA). The formation of a conglomerate occurs through functional mergers (a merger of firms related in the production process) or through investment mergers (a merger of firms without a production community)
(from Latin conglomeratus - crowded), a mechanical connection of something dissimilar.
coarse sedimentary rock; cemented pebbles mixed with sand, gravel and boulders.

Encyclopedia of Brockhaus and Efron

Conglomerate