Talk:Conglomerate (company)

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Hi I am not sure if I understand the following mentioned in the article about 'Conglomerate'.....can u please clarify....thanks

Potential advantages

To modern business analysts, the best argument for conglomerate organizational form is that it may allow capital to be allocated in a more efficient way. For example, a hypothetical conglomerate consists of a candy store and an internet website. Suppose the candy store has high cash flow, but very few profitable investment opportunities. The website has low cash flow, but lots of good investment projects. By combining the businesses together, the cash from the candy store can be used to make profitable investments that would otherwise not be made in the web site. The main question associated with this strategy is why this improves upon a market-based allocation of capital. That is, if the entities were standalone, then presumably the investors in the candy store could receive dividends, and then reinvest those dividends in the startup. If this market-based mechanism works well, then all profitable internet startup investments can be made without having the two entities be under common ownership. Research suggests that financial markets may not always operate efficiently due to the presence of transaction costs and asymmetric information. If this problem is severe, then the common ownership of the assets might yield a more efficient allocation of capital.

[edit] Mitsubishi

Good day. Mitsubishi is mentioned as a Japanese conglomerate, and while conglomerates in Japan still exist in the form of the trading companies ("Sogo-shosha"), Mitsubishi in its current form consists of several completely different publicy traded entities. Pre-WWII, Mitsubishi, along with Mitsui, Sumitomo, and others was a true conglomerate. Please see the entry for "Zaibatsu". I will leave this comment for 3 days and if there are no objections, will edit the article to provide greater specificity on conglomerates in Japan —Preceding unsigned comment added by 124.102.77.208 (talk) 13:35, 17 January 2008 (UTC)