Conglomerate refers to a group of corporations working under a common corporate structure. Conglomerates are usually made up of companies engaged in different industries and are held together by one parent company.
Conglomerates sprung up in the 1960s when interest rates were low and the economic climate was conducive to buying out other companies. In the process, the stock prices of these conglomerates rose and facilitated the buyout of even more companies, thus leading to rapid growth.
Companies also form conglomerates in order to diversify, in the interest of gaining and maintaining economic stability. If one of the conglomerate’s company fails, there will still be others who may perform much better, depending on the industry conditions at a given time. On the other hand, due to the many layers of management in many conglomerates, they also tend to incur heavy costs on managerial salaries.
In South Korea, the most well-known form of conglomerate is referred to as a chaebol. A chaebol is a kind of conglomerate owned and controlled by a family. The South Korean government has played an important role in strengthening the chaebol, as there was a time when these were given tax incentives and subsidies, in an effort to speed up the industrialization process in the country.
The chaebol turned out to be very successful, to the point that their influence stretched beyond the economic scene. The chaebol has also become very much involved in South Korean government, and many chaebol heads have also taken seats in public office.