ECONOMICS
COMPETITION AND MARKET STRUCTURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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reduce the risk of failure
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make production more efficient
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decrease competition and raise prices
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all of the above
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Detailed explanation-1: -Two firms would enter into a conglomerate merger to increase their market share, diversify their businesses, cross-sell their products, and to take advantage of synergies.
Detailed explanation-2: -Conglomeration allows a company to diversify its revenue stream, reduce its market risk, and the possibility of a takeover. If not managed well, conglomerates can lead to vulnerabilities in the parent company by being spread too thin from managing too many companies.
Detailed explanation-3: -Key Takeaways A conglomerate is a corporation made up of several different, independent businesses. In a conglomerate, one company owns a controlling stake in smaller companies that each conduct business operations separately.
Detailed explanation-4: -A conglomerate diversification strategy helps lessen the risk of loss. For example, if one business sector experiences a decline, other business sectors compensate for the losses. A conglomerate merger allows companies to cross-sell their products when the target market is similar.