In the 21st century it sometimes seems as if society is moving to a time when all companies will be owned by the same master corporation. Instead of fearing the day the machine takeover, many activists fear the day when only a handful of corporations control everything. On a practical note, most companies don’t stand to gain much by buying or merging with completely unrelated fields and industries. The learning curve to succeed is much to high, if the company can even find the capital to make the initial and ongoing financial investment. So why do companies from TimeWarner to Southwestern Company to General Mills diversify?

Synergy is usually the first reason a company will diversify . This involves the principles of economies of scale and scope,when combining a manufacturing company with the firm that supplies raw materials provides lower operating costs and overhead. This calls for companies to be in the same or related industries. Another reason related companies merge is to expand market share. The SouthWestern family of companies are mostly closely-related industries that aligned with or were born out of the company’s original core business of book selling.

Other reasons for corporate diversification may be focused on financial health and viability, such as profit stability, growth, and generating cash flow from one business to support new ventures or shore up struggling corporate divisions.