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Usually, with exceptions, conglomerates (the dreaded c-word) are not desired by investors. There's even an estimated "conglomerate discount" for companies of th

by shas3 12y ago

Usually, with exceptions, conglomerates (the dreaded c-word) are not desired by investors. There's even an estimated "conglomerate discount" for companies of this kind. With certain word-replacements, your comment can be applied for Hewlett Packard too, until the last part. GE, Berkshire Hathaway, General Dynamics, UTC, Honeywell, DuPont, 3M, etc. are exceptions to the rule, when it comes to the performance of conglomerates! One thing common to these companies is adaptability: they are constantly in churn and constantly seek changes in direction to focus on whatever products are profitable. For every successful conglomerate, there are dozens which failed or were broken up. Given all this, it is too early to sing praises for Tesla! Musk is a great visionary, but creating the next GE also requires a lot of luck and happenstance. [1] http://www.economist.com/news/business/21593412-conglomerates-once-seen-heading-extinction-are-spreading-their-wings-dodo http://www.economist.com/news/business/21593412-conglomerate... [2] http://www.foxbusiness.com/markets/2011/01/19/dismantling-conglomerates-trendy/ http://www.foxbusiness.com/markets/2011/01/19/dismantling-co...

chatmasta 12y ago
Those conglomerates developed before the age of computers. They designed their operational structures without the convenience of modern technology, and therefore relied on expanding work forces to grow their company. Labor was cheap, and necessary for growth at the time because humans had to do so much more than they do now. Facebook is a multinational company with only a few thousand fulltime employees. If GE or Microsoft developed in the same technological context as facebook, they would likely employ far fewer people than they do now. The market increasingly favors agility, and monolithic business models are becoming obsolete (if they are not also decentralized in some capacity, a la Uber). Tesla can become a powerful multinational player while remaining agile.
- kriro 12y ago
  The conglomerate structure is kept by choice in the case of Berkshire Hathaway. There's a pretty good outline of the reasoning by Buffett in the 50th anniversary letter. 3M is often used as an example in Strategic Management, particularly as an example of Mintzberg's views (strategies emerge and are not planned). I think the emerged strategy is usually labeled "working with surface material" or something. I guess one could argue "battery company" is an emergent strategy for Tesla in that sense but I think there's certainly planning to it and it wasn't just discovered. But you can use that "post-branding" that is typical of Mintzberg and I think the author of the blog does a good job.

by shas3 12y ago

chatmasta 12y ago

Those conglomerates developed before the age of computers. They designed their operational structures without the convenience of modern technology, and therefore relied on expanding work forces to grow their company. Labor was cheap, and necessary for growth at the time because humans had to do so much more than they do now. Facebook is a multinational company with only a few thousand fulltime employees. If GE or Microsoft developed in the same technological context as facebook, they would likely employ far fewer people than they do now. The market increasingly favors agility, and monolithic business models are becoming obsolete (if they are not also decentralized in some capacity, a la Uber). Tesla can become a powerful multinational player while remaining agile.

kriro 12y ago
The conglomerate structure is kept by choice in the case of Berkshire Hathaway. There's a pretty good outline of the reasoning by Buffett in the 50th anniversary letter. 3M is often used as an example in Strategic Management, particularly as an example of Mintzberg's views (strategies emerge and are not planned). I think the emerged strategy is usually labeled "working with surface material" or something. I guess one could argue "battery company" is an emergent strategy for Tesla in that sense but I think there's certainly planning to it and it wasn't just discovered. But you can use that "post-branding" that is typical of Mintzberg and I think the author of the blog does a good job.