The are numerous strategic grounds for a company to develop outside of its original industry.
Plenty of conglomerates are often looking for their next big investment, purchase, or expansion. This is when money is needed. Whenever most companies need to raise capital so that they can expand, they could need certainly to resort to measures such as getting outside investment or attempting to sell assets. But, conglomerates don't as a rule have this issue. The reason being various conglomerate subsidiaries can each generate capital, which when combined can be more than enough to finance their next venture. In the event that business headed by Abdulaziz Abdul Rahman Rashed Al-Rashed, for instance, wishes to expand into a new industry then their present subsidiaries could have enough resources to do it. This can cause greater control, as the company need not sell shares to someone else who may look to take the organisation right into a different direction.
Conglomerates might appear like they are too big and ineffective. However the size of the business does result in some efficiencies. These come in the form of economies of scale and scope. Big businesses reduce relative expenses as they develop, in addition they gain benefits from complementary services within all of the subsidiaries. This will imply that conglomerates are able to benefit from new business ventures with techniques that smaller organisations aren't. Companies like that of the family of Hutham Olayan, as an example, have been in a position to expand therefore big exactly because they did so constantly and diversely, instead of being careful and restrictive. This then contributes to a cycle of development and investment, as each subsequent expansion makes the next one easier, and so forth. Typically the only barriers at this point are in the event that expansion they would like to make is simply too large, such as an acquisition or merger that risks the competition of an industry.
The business world is filled with danger. Every feasible company choice can either end in profit or loss, with a few effective businesses meeting their demise due to one bad choice. Even being cautious is a risk, as it can cause the business being left behind. The size of conglomerates permits them to really have a particular shield against investment danger. By diversifying into various sectors, a subsidiary that experiences a downturn could be supported with a subsidiary that is successful. It is very hard for a big conglomerate to see widespread failure if they have diversified enough. This might result in conglomerates being very long lasting. Even companies that are technically not conglomerates but are separate businesses underneath the same brand name, like those headed by Mohammed Abdul Latif Jameel, experience a form of this because the brand name is less inclined to die out if it's contained in many industries.