26 Outline one advantage and one disadvantage of conglomerate integration.

[Sir Afzal Shad]

26 Outline one advantage and one disadvantage of conglomerate integration. [8]
Hint: Advantage: Spreads risk > A downturn in one industry won't destroy the whole group.
Hint: Disadvantage: Lack of expertise > The business may have no experience in the new industry it has entered, leading to poor decisions.

[Shaliza khawaja]

conglomerate integration is when a business takesover a busienss in a completely different industry for exampe a clothing company taking over a food business, this not only spreads risk of faliure as it is not only depended on one industry, as when one industry performs poorly the other can cover its cost and balance it makign the overall business more stable, this would let a business achieve long term stability however if the industry lacks experties in the new industry they can suffer a loss ad they would not be good at making decision in that, managers would not understand customers wants, making them unsatisfied and hence losing customers, leading the business to a loss, decreasing success rate and recovery difficult for the business .

Examiner Comments:
- Please follow the structure [KN], [APP]
- Attempt this question as an 8 marker [KN], [APP], [AN], [AN+]

[shamaim shakeel]

Advantage Spreads risk

(KN)
An advantage of conglomerate integration is that it helps a business spread its risk by operating in different industries.

(APP)
For example, if a mobile phone company buys a food company, it will earn from both technology and food markets.

(AN)
This means if one market faces losses or a fall in demand, the other business can still make profit.
(AN+)
As a result, the business becomes more stable and less likely to fail during an economic downturn.

Disadvantage Lack of expertise

(KN)
A disadvantage of conglomerate integration is that the business may not have experience in the new industry it has entered.

(APP)
For instance, if a car company buys a clothing brand, its managers may not understand how the fashion industry works.

(AN)
This can lead to poor decisions and mistakes in production or marketing.
(AN+)
Because of this, the new business might not perform well, which could reduce profit and harm the company’s overall success.

[Muaz Aamir]

KN Conglomerate integration happens when two businesses that operate in completely different industries merge together.

AP For example, if a car company merges with a food company, that would be conglomerate integration since they’re unrelated sectors.

AN:One advantage is that it helps spread risk — if one industry performs badly, the other can still make profits, keeping the overall business stable.
But the disadvantage is that it can be hard to manage two very different types of businesses, since the owners might not have experience in that other industry, which could lead to poor decisions or losses.

[Aayan Zaidi]

KN: Conglomerate integration is when a business joins with another in a completely different industry.
APP: E.g a phone company buying a clothing brand spreads its risk across different markets.
AN: This reduces risk, but it can be hard to manage a business the company has no experience in.