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To create a conglomerate will require you to extend your corporate reach into several different industries.That's the nature of a conglomerate: an umbrella corporation that manages a portfolio of different product lines. Some corporations become conglomerates by buying up other businesses. Other corporations diversify as they develop a greater variety of products.
Hunt for Synergy
The "Harvard Business Review" notes that conglomerates often stumble and fail because of the difficulty of managing businesses in several different industries. Before launching an expansion, decide how becoming a conglomerate will work for your corporation. Owning a retail store and a manufacturer that sells to it may work well. A company with a distinctive, successful manufacturing method may be able to apply its methods in different manufacturing industries. If your company already prioritizes first-rate customer service, that's another skill set you can adapt to other fields.
Tapping Your Skill Set
One way to expand from corporation to conglomerate is to build upon what you already do. Amazon, for example, started out as purely an online retailer of books, then became a retailer for all kinds of merchandise. Now it's gone several steps beyond that, selling the Kindle for reading ebooks, offering online payment services to other companies and providing cloud services. If you see a way to take your current core competencies and diversify into new fields, you may be on your way to becoming a conglomerate.
You can also build a conglomerate by buying other businesses. Facebook, for example, bought WhatsApp, Instagram and the Oculus Rift gaming company. This often requires a sizable war chest -- Oculus Rift alone cost Facebook $2 billion. If you aren't already a multinational, you may have to prioritize which companies you want to buy. Facebook, for instance, primarily buys up competing social networks. Randomly buying companies just because you can afford them won't lead to healthy growth.
Develop an Exit Strategy
As you expand and diversify you may find the expansion strains your management team. If you buy a promising-looking start-up, it may flat-line a year later. To weather the storms, it can help to have an exit strategy. Many conglomerates, finding their subsidiaries underperforming, decide to spin them off as separate companies. The risk is that if the market changes down the road, you may find yourself wishing you'd stayed diversified.
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.