Do you think of companies like Google and Amazon as conglomerates? Let’s look at how successful today’s conglomerates are when compared to the companies who started the business model over two decades ago.
In the past conglomerates were able to increase their market shares but ended up in failure because the business model was not sustainable for the bottom line during that era. The definition of conglomerate in Wikipedia is “a combination of two or more corporations engaged in entirely different businesses that fail under one corporate group.” The reason the conglomerate business models failed so long ago was because businesses who tried to compete in different areas couldn’t be consistently better than businesses that only focused 100 percent on one area. Today, however, it seems that conglomerates have the business model well under control.
Samsung appears to be one of many successful conglomerates. If you think about where the company first started, making refrigerators and other electronics, to where it is today: manufacturing mobile phones, TV’s, software for its phones, buildings, etc. you see a different conglomerate model from what was previously defined. Last year it reached sales of $179 billion and the company happens to employs 370,000 people worldwide. The company has consistently done extremely well and continues on a growth pattern. In fact, in South Korea, it has 17 percent of the GDP and its stock has given returns of approximately 25 percent each year for the last 20 years.
In addition, Berkshire Hathaway (in the financial sector) is a well-established conglomerate. The company’s foundation stems from insurance businesses which generate a significant cash flow. Moreover, Warren Buffet’s company also operates businesses ranging from anything in the manufacturing sector to the railroad sector.
Then you have a company like Google. Google has been using its strength in one area to become a dominant force in a number of diverse areas, such as building cars and producing electricity. Google started off with a search engine platform and has expanded into all types of online services including self-driving cars, maps, mobile phones, clean energy, internet provider, same day shipping, computerized glasses, etc. It appears that Google has a leading edge in the areas in which it operates thereby making it one of the biggest 21st century conglomerates.
Amazon is not as diversified as the previously stated companies. However, it’s certainly a conglomerate in its own right with operations in global data storage, distribution of physical and digital goods, and manufacturing hardware such as Kindle. Amazon has the ability to sell for the long-term with little to no overhead costs which enhances its ability to continue to gain market share and eliminate competitors.
All of these companies share one similarity. They all have strong market share, continue to grow by making wise decisions in all arms of operations as well as new ventures, while they continue to operate each arm at highly effective and consistent levels.
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