Usually, a larger business will buy a smaller one for one of the two reasons. They either want to take away any competition, or they do it for strategic or tactical reasons.
As a result, we now live in a world with some business giants out there that own multiple smaller companies. This is especially apparent when you look at the internet-based businesses. We have some global web giants such as Apple, Facebook, Microsoft, Google, Expedia, and various others that seem to own the majority of smaller web-based companies.
Let’s take a look at the reason why these companies might be looking to continue their portfolio of small businesses.
Reducing the competition
There is one certain way to make sure that you are one of the biggest businesses on the web, and it consists of making sure you are the only one left in your niche! That is why some of the more dominant brands in a certain industry, like travel for example, will start to buy other, similar businesses.
Currently, the popular travel site Expedia also owns Hotels.com, Trivago, Travelocity, HomeAway, and Egencia, to name just a few. Thanks to its massive reach, the travel giant is able to offer many Expedia discounts to both new and loyal customers, another addition to its success.
Strategical and Tactical
There are many strategic reasons why one business might want to own another. For example, if the larger business has a weakness in a certain area, they may be looking to fill that weakness.
Other examples could be that a smaller business has trained or qualified staff that would fit in perfectly in the larger business, or if the big business wants to expand its product line or combine resources. This is a very broad category that could include a wide range of different situations.
For example, the global social media giant Facebook has recently acquired Oculus. The reason behind this decision was Facebook’s intention to easily enter the VR business, something it previously would not have been able to do without the technical knowledge that Oculus offers.
Related Post: 5 Steps to start your dream business online