[1] https://www.metafilter.com/62394/The-Record-Industrys-Declin...
This article talks a bit about the conglomerate break-ups of the 70s, which includes a great graph showing the rise and fall of such:
article: https://www.cbinsights.com/research/disrupting-management-co...
graph: https://s3.amazonaws.com/cbi-research-portal-uploads/2018/05...
Conversely, when money is cheap, you can just incorporate all your verticals as freestanding entities (aka "startups"), often beneath a decentralized control structure (aka "cabal of venture capitalists who collude with one another") through which you maintain influence over them without incurring any of the unpleasant legal ramifications caused by explicitly linking the verticals together in the eyes of the law. You can do this latter decentralization thing since you're freed from the frequent need to move money between verticals, and can instead just pump money into them (if necessary) every year or two (aka "funding rounds").
However, I have no clue how Asia works.
Other good examples are Unilever, Google, Apple, Freeport McMoran, Tata Group etc. Once you bring China into the equation it becomes more difficult to trace the global connections due to massive state ownership, but I'd be surprised if they didn’t have interests in many global conglomerates.
This isn't really conspiracy theory, this is just how a global economy is evolving amidst multiple conflicting interests and regulatory bodies.
Berkshire Hathaway is an extremely good example. It includes a wide variety of companies that like to spin off cash, such as See's Chocolates, combined with a core insurance company that could need access to very large financial reserves. According to http://www.berkshirehathaway.com/letters/2017ltr.pdf they are operating under the assumption that a $400 billion catastrophe has a 2%/year probability, and they are prepared to weather such an event.
Another good example is Amazon. They are the humble bookstore that does everything from web hosting to delivering groceries.
The US ones are largely siloed collections of companies across a spectrum of industries.
The Japanese ones are strongly vertically integrated. I was told when I was sponsored by Yamaha for international ski racing competition and at one of their testing camps: 'we mine the ore, make the metal, make the machines that make the tools, make the tools, and then use the tools to make the products'. It's about both controlling the quality all the way up and down the value chain, and also capturing the value-add all the way up the chain (not sure how much of each).
I was quite impressed by their quality and technology, which was the prime reason I went with them. At the time, they were one of only two companies worldwide that could make a pair of skiis that was actually indistinguishable left/right to racers at our level (the other was Fischer which dominated the Swiss, Austrian teams and we wouldn't get their best race stock), and Yamaha had amazing ability to tune the performance properties. I'm quite sure that they could do it because of their strong vertical engineering and QA integration.
(Always seemed like a superior model to me, but I'm not a big biz guy, so what do I know?)
Edit: typos,clarity
I've never heard about Yamaha skis. But I am from Europe so in alpine skiing (FIS races) I just know the European brands (Rossignol, Fischer, Head, Atomic or even more obscure ones like Stöckli).
I'm not sure if Yamaha is still active in racing, but they had some really amazing skis, and they tried out a lot of interesting ideas. One of my favorites was a triple-core construction where two of the cores were a high-energy elastomer pre-stretched in the mold to ~5x their original length. The idea of this pre-load was to have a moderately soft flex but return a lot of energy as the ski un-bent as you exited the turn -- and it worked like crazy -- the best pair of GS skiis I ever had! I also had a pair of 220s to try for DH; they were not fast probably because they had too much energy and vibration on the straights, but they were an absolute blast for hi-speed free-skiing -- just crazy spring out of the turns -- I was sad to have to turn them back in since they weren't going in my race bag.
Fun times...
American companies aren't diversified in the same way because investors realized that breaking up a conglomerate maximizes the stock prices - the underperforming parts put a damper on the stock.
The main goal of having conglomerates is to modularize essential parts, in particular a financing branch that acts as a money pump through the whole group.
So by definition the companies from the same group are defined legally as separate units while fixing deals between themselves and protecting the other companies’ turfs.
https://dqydj.com/dow-jones-return-calculator/ may 1998 - may 2018 = 323.965%
http://www.macrotrends.net/stocks/charts/BRK.A/prices/berksh... May 1998 - May 2018 = 320%.
Is Google or Amazon not at the conglomerate level yet? Is it simply because their services and products are all on the internet?
I've seen the trend go the opposite direction - conglomerates are in now, because they give you nice steady dividends and less shock when one part of the company is failing. If not for AWS, where would AMZN stock be today? I've seen no serious effort on the investor level to break up these companies, and practically none politically (fledgeling movements on the far ends of the spectrum).
The pressure to break up a conglomerate comes from outside investors who don't have a stake in running the businesses. There have been hostile takeovers motivated completely by the anticipated profit from a breakup. I don't see that happening for either Google or Amazon.
But isn't AWS the same as Amazon, just instead of selling a new vacuum, its selling cloud compute? Its still e-commerce, just rebranded as "cloud provider."
- Billing: One bills you before shipping, the other bills at the end of the month.
- Cart: One lets you add items to a cart, the other lets you use products via API.
- Delivery: One requires warehouses all over the world, the other requires data centers all over the world. Only warehouses and data centers are so specialized that they aren't interchangeable.
- 3rd parties: One is a platform for creating online storefronts where 3rd parties can sell. The other is a platform that runs any code you want.
- One has a mass market audience of consumers, the other has a highly specialized market of developers.
Hmm, on second thought, maybe they are not the same business.
in markets which are corrupt or there is expectation of weak enforcement of contracts between different companies - the only viable option often is to acquire what you need under your own umbrella. This is an explanation I read somewhere for why conglomerates may have an advantage.
This is because of political influence/leadership. Such companies would not have existed unless there was a political will to build large conglomerates like the zaibatsu in Japan (same thing in Korea with Samsung that does about everything). This is hardly free market at work.
Besides, this is not what you think it is. Mitsubishi is actually composed of hundred of sub-group companies that have basically nothing to do with each other, and simply share a larger umbrella brand, but in effect act as semi-autonomous entities.
US companies tend to use wholly owned subsidiaries for stuff like that.
The steering wheel in my 90s pickup has the United Technologies logo on the casting. That's almost a completely different industry (aerospace and civilian automotive doens't have a as much common supply chain as you'd think).
https://en.wikipedia.org/wiki/Keiretsu