2. What are the dangers and disadvantages of this strategy?

United Technologies Corporation (UTC), based in Hartford, Connecticut, is a conglomerate, a company that owns a wide variety of other companies that operate in different businesses and industries. Some of the companies in UTC’s portfolio are more well known than UTC itself, such as Sikorsky Aircraft Corporation; Pratt & Whitney, the aircraft engine and component maker; Otis Elevator Company; Carrier air conditioning;
and Chubb, the lock maker and security business that UTC acquired in 2003. Today, investors frown upon companies like UTC that own and operate companies in widely different industries.
There is a growing perception that managers can better manage a company’s business model when the company operates as an independent or stand-alone entity. How can UTC justify holding all these companies together in a conglomerate?
Why would this lead to a greater increase in their long-term profitability than if they operated as separate companies? In the last decade, the boards of directors and CEOs of many conglomerates, such as Dial, ITT Industries, and Textron, have realized that by holding diverse companies together they were reducing, not increasing, the profitability of their companies. As a result, many conglomerates have been broken up and their companies spun off as separate, independent entities.