Corporations: The End of Corporations – Again

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The once mighty corporations have been shrinking for decades, and last week “one of the biggest survivors waved the flag of surrender,” David Nicklaus said at St. Louis Post-Dispatch. In cutting off its medical and energy businesses, General Electric is tearing apart an empire that has stalked American business since 1892. Soon after, Toshiba, headquartered in “Japan” Group Favorites” and Johnson & Johnson said they are splitting up their vast entities, too. This economies of scale makes sense “when buying office supplies or accounting services, but their bureaucratic layers” come with a cost. Some companies still stick to this model, like 3M, which “makes 60,000 products ranging from Scotch tape to medical software.” Warren Buffett’s Berkshire Hathaway is “a longtime investor’s darling,” but its portfolio includes “electrical utilities, railroads, insurance, and chocolate.” The Buffett-GE model “was all the rage in corporate boardrooms.” Now it is ancient history.

Brooke Masters at Financial Times. That’s because the history of corporations is cyclical. The first giants – ITT and Tyco are examples – grew by acquisition, then they split. After it “become common sense that corporations need to be disbanded, we end up with companies that are so specialized that someone decides it’s meritorious” to be all-inclusive, and the cycle start over. Brooke Sutherland speaks at Bloomberg. It’s “a cautionary tale” about how “avoidance, omnidirectional, and size for the sake of size” can go horribly wrong. But “the key tenet of the modern corporation is to constantly regenerate and be ready to pivot.” That philosophy has benefited other “reimagined corporations” such as Honeywell and Roper Technologies.

Jason Zweig speaks at The Wall Street Journal. ITT first “populated the idea that hundreds of elite managers” could provide expertise on a wide range of topics. GE, under the leadership of CEO Jack Welch, has elevated “management to a kind of science,” with a “leadership institute” in New York’s Hudson Valley. But “in the early 2000s, the company was spending $1 billion a year on training.” GE became complacent with the belief that “management technology will always save” it.

Matthew Boyle said at Bloomberg. Yesterday’s giants have been replaced by what University of Michigan business professor Jerry Davis calls a “new corporation,” such as Amazon, which sells everything from groceries to electrical services. corporate cloud computing. “This new breed, fueled by programmers and cheap capital, is now generating the same awe and respect among management and investors as Welch’s GE did in the 1980s.” What they do better than GE is “get there quickly to profitability, whether it’s automation, social commerce, sustainability, or even the much hyped metaverse.”

This article was first published in the latest issue of Week Journal. If you want to read more like it, you can try the magazine’s six risk zeros here. Corporations: The End of Corporations – Again


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