In the light of the St Gobain case, explain why it might good to be a conglomerate Despite contemporary strategic thinking, the conglomerate is not extinct everywhere. In France, famous for its policy of nurturing national champions, the glass-maker, St Gobain, privatised in 1986, has since thrived on a diet of acquisition of often unrelated businesses. The Chairman/CEO, Jean-Louis Beffa, is scornful of the drive for focus as firms try to concentrate operations on ‘core’ areas of business. M. Beffa has overseen the acquisition of over 900 companies, including many in the distribution of building materials, an activity uncharted by St Gobain until the 1990s.

Beffa says about ideas of focus:

Look at Siemens. They are better for having a mix of companies from which they can get a strong cash flow.

In support, he points to St Gobain’s balancing of distribution operations, covering a broad range of items for the building trade and operated mainly on a regional basis, with the global manufacturing of flat glass (where St Gobain is world number 2 after Asahi of Japan), and containers.

Glass production is highly cyclical, changing with the oscillations of the world economy, whereas the distribution of building materials is far more stable because different national markets have their own peculiar patterns of troughs and peaks. St Gobain’s diversification strategy gives it the consistent financial fire-power – cash flow of Euros 2.8 billion in 2003 –

to finance growth by capital spending and by acquisition.