What are the Advantages and disadvantages of conglomerate diversification?

The advantages and disadvantages of conglomerate diversification are as follows:

Advantages of conglomerate diversification

a. Risk spreading ? entering new products into new markets offers protection against failure of current products and markets.

b. High profit opportunities ? Ability to move into high growth profitable industries especially important if current industry is in decline.

c. Escape ? from the present business if competition is too hot!

d. Better access to capital markets.

Disadvantages of conglomerate diversification

a. The dilution of shareholders earnings if diversification is into growth industries with high P/E ratiOS.

b. Lack of a common identity and purpose in a conglomerate organization. A conglomerate will be successful only if it has high quality of management and financial ability at head office where diverse operations are brought together.

c. Failure in one business will drag down the rest.

d. Lack of management experience..