Conglomerates and Franchises
Conglomerates
& Franchises
By
Emily Chui
& Benjamin Chu
Let’s Define:
Conglomerate- a large business that is made of different kinds of companies
Franchise- the right or license granted to an individual or group to market a company's goods or services in a particular territory; also : a business granted such a right or license
Let’s Simplify:
Conglomerate- a company that owns other smaller companies Franchise- a business that is part of a single chain; can be owned corporately or privately Quick Check:
1. What is a
Conglomerate?
2. What is a
Franchise?
The Roots: Conglomerates
-In the late 19th century many American conglomerates, such as the Standard Oil Company and
Trust, sought to control all aspects relating to the development, production, marketing, and delivery of their products(a monopoly)
-Responding to criticisms of the apparent monopolies enjoyed by such companies, the U.S.
Congress enacted antitrust legislation with the Sherman Antitrust Act (1890) and the Clayton
Antitrust Act (1914).
-A strategy of diversification spurred the formation of many conglomerates in the mid-20th century, especially as firms sought to acquire unrelated companies whose products and services might better withstand economic slowdowns
-In that era, a holding company might have had interests that included hotels, film studios, telephone service, and insurance
-By the late 20th and early 21st centuries, however, global competition created conditions that favoured industry consolidation, as evidenced by mergers among large corporations in the banking, automotive, telecommunications, computer, retail, and entertainment industries
Advantages & Disadvantages
Advantages:
Disadvantages:
-If you lose profits in one company, the others can balance out the loss
-extra layers of management increase costs.
-Accounting disclosure is less useful and tends to be more complicated
-The complexity of a conglomerate's accounts make them harder for managers, investors and
regulators
& Franchises
By
Emily Chui
& Benjamin Chu
Let’s Define:
Conglomerate- a large business that is made of different kinds of companies
Franchise- the right or license granted to an individual or group to market a company's goods or services in a particular territory; also : a business granted such a right or license
Let’s Simplify:
Conglomerate- a company that owns other smaller companies Franchise- a business that is part of a single chain; can be owned corporately or privately Quick Check:
1. What is a
Conglomerate?
2. What is a
Franchise?
The Roots: Conglomerates
-In the late 19th century many American conglomerates, such as the Standard Oil Company and
Trust, sought to control all aspects relating to the development, production, marketing, and delivery of their products(a monopoly)
-Responding to criticisms of the apparent monopolies enjoyed by such companies, the U.S.
Congress enacted antitrust legislation with the Sherman Antitrust Act (1890) and the Clayton
Antitrust Act (1914).
-A strategy of diversification spurred the formation of many conglomerates in the mid-20th century, especially as firms sought to acquire unrelated companies whose products and services might better withstand economic slowdowns
-In that era, a holding company might have had interests that included hotels, film studios, telephone service, and insurance
-By the late 20th and early 21st centuries, however, global competition created conditions that favoured industry consolidation, as evidenced by mergers among large corporations in the banking, automotive, telecommunications, computer, retail, and entertainment industries
Advantages & Disadvantages
Advantages:
Disadvantages:
-If you lose profits in one company, the others can balance out the loss
-extra layers of management increase costs.
-Accounting disclosure is less useful and tends to be more complicated
-The complexity of a conglomerate's accounts make them harder for managers, investors and
regulators