What is a holding?
A holding is a form of business organization in which companies are united under the management of one large holding company. The purpose of creating a holding is to share resources and optimize management, which allows achieving economies of scale and increasing profits.
A holding company can be formed in different ways. For example, a large company can acquire another company and merge it with itself. This approach allows the parent company to manage several companies, increasing its market potential.
Another way is to create a holding by combining several companies that can complement each other in their activities. In this case, each company continues to work in its own field, but under the general management of the holding. This allows companies to gain access to new resources and expand their business due to the synergy that arises as a result of the merger.
Another way to form a holding is to attract investors. A holding can be created by combining several companies that have invested money in a common business project. In this case, the holding is managed by professional management, which coordinates the work of all companies in the holding.
In any case, the formation of a holding is a long-term and complex process that requires high qualifications and understanding of business from all participants. However, a successfully created holding can become a powerful player in the market and provide its companies with significant competitive advantages.
Examples of holding companies
In the business world, there are many large holding companies that own subsidiaries in various industries. These companies play an important role in the global economy and have a significant impact on the lives of millions of people around the world.
One of the largest holding companies in the world is Alphabet Inc., which was created in 2015 as a result of the restructuring of Google Inc. Alphabet owns companies such as Google, YouTube, Android, Google Cloud and others.
Another major holding company is Berkshire Hathaway, founded by Warren Buffett. The company owns brands such as Geico, Duracell, Dairy Queen, and Fruit of the Loom, and has significant investments in other large companies such as Apple, Coca-Cola, American Express, and Wells Fargo.
Also worth noting is the holding company Johnson & Johnson, which is one of the largest manufacturers of medical products in the world. The company owns more than 250 subsidiaries in various areas of medicine, including pharmaceuticals, medical devices, diagnostics and consumer goods.
Other large holding companies include Procter & Gamble, which owns brands such as Pampers, Tide, and Gillette; ExxonMobil, one of the world's largest oil companies; and Nestle, which owns more than 2,000 food and beverage brands.
Holding companies thus play an important role in the global economy and are key players in industries ranging from technology and medicine to food and oil.
Features and characteristics of a holding
A holding is a large company that manages several subsidiaries in different industries and regions. The main principle of the holding is to combine the resources of different companies to achieve a common goal and increase efficiency.
Here are some of the main features and characteristics that distinguish holdings:
- Control over multiple companies: One of the key characteristics of holding companies is that they control multiple companies, each of which may be in different industries or regions.
- Resources: Holdings use the resources of their subsidiaries to improve their efficiency and competitiveness.
- Management: Holdings have centralized management that ensures coordination between subsidiaries.
- Brand: A holding company may have its own brand, which is used to promote the products and services of all its companies.
- Financial Benefits: One of the main advantages of a holding company is that they can reap financial benefits through economies of scale and synergies.
- Process improvement: Holdings can use the knowledge and experience of their subsidiaries to improve their business processes and productivity.
- Risk diversification: Holdings can spread risks among their subsidiaries, which helps reduce the overall level of risk.
- Flexibility: Holdings can quickly respond to changes in market conditions and restructure their activities in accordance with new requirements.
Holdings can be very different in their structure, size and industries they operate in. However, they have common features and characteristics that make them unique and successful in business.
Types of holdings
A holding company can control companies in various industries and fields, and often aims to manage different businesses or assets, optimize business processes and increase profitability.
Below are 7 types of holdings by area of activity.
Financial holdings. These are holdings that invest money in various companies and assets, including bonds, stocks, and real estate. Financial holdings receive income from investments and manage their assets using various financial instruments.
Industrial holdings. They unite companies engaged in the production and sale of goods in different industries. Industrial holdings have strong business processes and infrastructure, and usually control a large market share in their industry.
Trading holdings. These are holdings that unite retail and wholesale companies engaged in the sale of goods of various brands. Trading holdings have a wide sales network and marketing channels that allow them to make the most of their market share and control sales in various regions.
Media holdings. They unite companies engaged in the production and distribution of media content, including television, radio, newspapers and magazines. Media holdings have a great influence on public opinion and politics, and often play an important role in shaping public opinion.
Technological holdings. They unite companies engaged in the development and production of high-tech products and services, such as software, electronics and telecommunications.
Types of holding integration
Depending on the type of integration, there are different types of holding.
Full holding
In this type of holding, the parent company has full control over its related companies. It purchases more than 50% shares of other companies to be able to control management and make decisions. A full holding can also be called a vertical holding, when the companies united in the holding are engaged in different aspects of the production of the same product.
Partial holding
A partial holding, as the name suggests, involves partial integration of companies. The parent company acquires less than 50% shares of other companies in order to be able to influence their management and make key decisions. A partial holding can be horizontal, when the companies united in the holding are engaged in the same activities, or conglomerate, when the companies are engaged in different types of business.
Mixed holding
A mixed holding combines elements of different types of holding. It can unite companies from different industries, engage in investment and management of financial assets, and control production activities. Mixed holdings can be very flexible and allow companies to achieve various business goals.
Vertical holdings
Vertical holdings unite companies that are at different stages of the production chain. For example, a holding company may own a manufacturing plant, a distributor, and a retail network. Such holdings can be especially effective in industries with a large number of intermediaries between the manufacturer and the end consumer. Vertical holdings usually have advantages in the form of higher efficiency, better quality control, and reduced costs.
Horizontal holdings
Horizontal holdings unite companies that are engaged in the same type of business. For example, a holding company may own several fast food restaurants. Such holdings can use economies of scale to increase efficiency and reduce costs. However, this can lead to problems with quality control and brand blurring.
Independent holdings
Independent holdings unite companies that have no similarities in business areas. These holdings may include companies from different industries, such as finance, technology, and agriculture. Independent holdings can use their resources and expertise to manage companies that are in different industries and have different goals. Such holdings can be especially useful during periods of economic crisis.
Conglomerates
Holdings and conglomerates are two terms that are often used in the business world, but many people do not understand the difference between them. Both terms are related to corporate structure, but their basic principles and functions are different.
Holdings are companies that control several subsidiaries, each of which operates its own business. A holding may have an ownership stake in each of its subsidiaries, but does not directly manage them.
Instead, a holding company provides general management and financial support to each subsidiary, helping them enter new markets, grow, and compete in their industry. Examples of holding companies include Berkshire Hathaway, Alphabet Inc., and Procter & Gamble.
Conglomerates are companies that operate several businesses that are not related to each other by industry. Conglomerates often bring together different companies that have different goals, products, and services. Each company in the conglomerate is independent and is managed independently of the other companies in the conglomerate. Conglomerates often buy companies that are in financial trouble but have potential for growth and development. Examples of conglomerates include General Electric, Danaher Corporation, and Berkshire Hathaway.
The difference between holdings and conglomerates is that holdings typically have similar business models and strategies for their subsidiaries, whereas conglomerates do not have a single business model and each company in the conglomerate may have its own unique strategy and management model. Holdings also often have direct management and control over their subsidiaries, whereas conglomerates do not.
Advantages and disadvantages of holdings
Holdings can have their own advantages and disadvantages, which are important to understand when evaluating their role in the economy and business.
Advantages of holdings
The first advantage of a holding company is the ability to share resources. A holding company may have better access to financial resources than individual companies. Due to its larger size, a holding company may have more favorable terms for loans and investments. This can help the companies in the holding company to develop and expand faster. Companies united in a holding company can share experience, technology, personnel, and other resources, which allows them to work more efficiently and economically.
The second advantage of a holding is the possibility of diversifying risks. If one of the companies in the holding encounters problems, the other companies will be able to compensate for this. Thus, the holding can reduce its dependence on one industry and increase its stability and reliability.
The third advantage of a holding is the ability to create synergy between companies. Each company in the holding can contribute to the overall business process, which can lead to increased productivity and reduced costs.
The fourth advantage of a holding is the possibility of improving management. Management of companies included in the holding can be centralized, which allows for more effective control over all business processes and decision-making based on complete information.
Disadvantages of holdings
One of the main disadvantages of holdings is the loss of control over subsidiaries. When a holding acquires a company, it becomes its owner, but often the management of the subsidiaries remains in the hands of the same people who managed it before the acquisition. This can lead to conflicts between the managers of the subsidiary and the management of the holding, which can negatively affect its operations.
Another disadvantage of holdings is the difficulty of managing a large number of companies. When a holding owns several companies, it must manage them effectively to ensure their success and growth. This can be a difficult task, especially if the companies have different directions and development strategies.
In addition, holdings may face the problem of competition. If a holding owns several companies that operate in the same industry, they may compete with each other. This may lead to a decrease in profits and a deterioration in the reputation of the holding.
Finally, another disadvantage of holdings is the risk of losing investments. If a holding invests in several companies, and one of them does not do well, this can negatively affect the holding's entire investment portfolio.
Thus, holdings have their advantages, but also disadvantages. When choosing such a business model, companies must weigh all possible risks and benefits to make the right choice.
Conclusion
Holdings are an important element of the modern economy and business. They allow companies to unite to achieve common goals, increase their competitiveness and growth, and expand their business through various strategic investments and acquisitions.
While holdings may be criticized for their monopolistic practices and possible negative effects on competition in the marketplace, they can also be beneficial to the economy and society as a whole due to their ability to innovate and their resilience to market fluctuations.
It is important that holdings comply with competition laws and regulations to prevent possible negative consequences for the market and consumers. In addition, they should strive for sustainable development and social responsibility to contribute to the creation of a favorable economic and social environment.
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