Outlook: Velcro company comes of age
Tuesday 03 March 1998
It was Inchcape's turn yesterday to announce a break-up. In an act of selfless sacrifice, this one actually involves the chief executive and the finance director doing themselves out of a job, something of a first. Don't feel too sorry for them though. They'll get a big fat bonus and pay-off for their trouble. So will the investment bankers that put these conglomerates together in the rolling 1980s.
That said, there's plainly industrial and investment logic in what's going on. The commercial pressure for consolidation and "focus" in industry comes primarily not from management and investment bankers, but from ever more demanding investors and customers. Investors want the greatest possible efficiency in use of their capital.
That in turn requires a degree of clarity and management purpose which is impossible in a group of many different businesses. In a conglomerate, the rate of return becomes fudged and obfuscated - it is possible for the poor performance of one business to hide behind the better performance of another.
The pressure for consolidation goes hand in hand with that of focus. The world becomes ever more competitive. The speed of innovation and enhancement is said to be greater than at any time this century. At the same time there is persistent downward pressure on prices. Consolidation allows corporations to counter these pressures with economies of scale.
It is indicative of how powerful these arguments are that even those of us who believe competition and diversity to be the best guarantee of the wider public interest, accept the inevitability of the process. All the same, we need to be a bit careful here. Most of us swallowed the now discredited arguments for diversification with equal enthusiasm. This time round it seems to be more than just fashion which drives the process. None the less, much of what is now being done in the name of focus and consolidation will turn out to have been equally misguided. Of that there can be no doubt.
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Shock poll shows voters believe Ukip is to the left of the Tories
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...