Conglomerates are corporations but not all corporations are classified as conglomerates. Both conglomerates and other types of corporations are legal entities, which means that the entity itself can buy assets or face lawsuits. Corporations, including conglomerates, must also pay state and federal taxes. However, conglomerates are distinguished by the fact that they have much more complex structures than other types of corporations.
Corporations tend to market products and services that are related to one sector of the economy, such as information technology, the automobile industry or banking. A conglomerate consists of a corporation that has a controlling interest in several other corporations. In many instances, these corporations operate in different sectors of the economy. This means that conglomerates are less likely to suffer financially if one sector of the economy goes into decline.
For example, if the automobile industry goes into a slump, corporations that operate solely in that arena will have financial problems. A conglomerate with automobile industry holdings will feel less of an impact than its competitors assuming that its interests in other arenas such as the media or the insurance industry do not also go into decline.
A corporation must register with a particular state before it can begin operations in that state, which means that major corporations have to register in many different states. Corporations owned by conglomerates also have to register at the state level, but the conglomerate itself does not have to register in every state where its subsidiaries operate. Conglomerates often acquire businesses located in other nations, and these holdings often operate under the name of the corporation rather than the conglomerate itself. However, a conglomerate may have to register itself as a legal entity in a particular company before it can actually buy a corporation.
Shares in global conglomerates are usually traded on several different stock markets around the world. Shares in many corporations are publicly traded and some firms are listed on multiple stock exchanges. However, shares in some corporations are privately held, which means you cannot buy or sell stocks of these firms on the open market. S corporations are a type of business entity that can have just one owner. Therefore, while multinational conglomerates may have hundreds of thousands of employees, some corporations have no employees, as one person can own and operate the firm.
Many nations have laws that are designed to prevent any one individual or business entity from creating a monopoly. Such laws can impact a corporation if it has a large market share within a particular area of the economy. Lawmakers in the United States and elsewhere can prevent large corporations from acquiring competitors if the acquisition would create a situation in which the buying firm could control the market and eliminate any meaningful competition.
Conglomerates are sometimes harder to control. This is because a conglomerate may not have a monopoly in any one area of the economy, but it may have control of a large number of major corporations that operate in different sectors. Therefore, a corporation could run into trouble with antimonopoly legislation, while a much larger conglomerate would remain untouched.
- Harvard Business School; The Conglomerate; Its Strategy and Structure; Norman Berg
- Utah.gov: Select Your Business Structure
- "China Daily"; County Fighting Against Monopolies; Jia Hepeng; December 2004
- Northern Illinois University; Media Diversification; Is Bigger Better After All?; Angela Powers
- SBA.gov: Corporation