Blackwell Reference Online

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Conglomerates are corporations that have no apparent strategic fit between the activities of their constituent businesses. They were defined by Wrigley in the early 1970s as businesses in which no one business accounted for 70 percent of sales and in which there was no readily apparent relationship between the activities. Conglomerates are also characterized by a small central office which is heavily oriented to finance and control, plus, in addition, acquisition analysis and implementation. Such businesses were popular in the US in the late 1960s, when it was argued that it was desirable to build a portfolio of strategic businesses at different stages of the life cycle that could financially compensate one another. In the early period of the use of the growth share matrix , this strategy was strongly advocated by the Boston Consulting Group, and the success of companies such as Textron, Litton Industries, and Ling Temco Vought (LTV) seemed to support the theory. There was no particular effort by firms adopting a conglomerate strategy to seek synergy or strategic fit between businesses, with the exception of seeking out financial synergy that could be released by the purchase of companies with underutilized assets, debt capacity, complementary cash flows, and so on. Typically, acquisition screens used by conglomerates emphasized criteria such as the following: • the ability ... log in or subscribe to read full text