Horizontal Vs Vertical Company

Conglomerates consist of a number of differing businesses, operating in a variety of sectors of industry and commerce. Generally, conglomerates have grown from a smaller, single activity company. Conglomerates usually acquire other businesses over a period of time for a variety of reasons; other businesses may simply have been attractive, profitable private limited companies that could not develop further without the resources of a larger organization. On the other hand, other businesses may have been struggling enterprises which the conglomerate’s Board of Directors (BOD) considered could be bought cheaply and, with careful management, turned into valuable, profitable businesses. Whatever the original reason for their acquisition, the component companies of such a conglomerate provide a good example of horizontal integration. The diverse and seemingly unrelated nature of other businesses’ activities provides the conglomerates with a broad base of operation in a number of different businesses, industries, countries and even continents.
Diverse trading reduces the conglomerates’ risk exposure in any one sector. Although conglomerates regularly rise and fall in the estimation of the share-trading public, a well-managed conglomerate can provide shareholders with both consistently good dividends and some expectation of capital growth. Usually, conglomerates will find a ready market for their shares when specialized sectors of the market are under pressure. On the other hand, opposite to a diverse group (conglomerates); the opposite being a vertically integrated company. Literally, vertically integrated company is the integration from top to bottom of a particular industry such as giant oil companies. For example, one company in the diverse group (conglomerate) owns some forest land, another company owns sawmills, another company owns a furniture manufacturing company and another company owns a chain of retail furniture shops.