Cross-ownership is when one entity owns multiple companies in the same market or invests in several companies that trade with the investor’s company. This strategy aims to strengthen relationships and control competition. Strong cross-ownership occurs when one owner controls multiple companies that account for a significant market share. It can occur in various industries, such as communications and fast food.
Cross-ownership is a type of business arrangement in which a single entity owns two or more companies that operate in the same general market and are somewhat similar in nature. The term is also sometimes used to refer to an investment arrangement in which an investor may own significant blocks of shares in several different companies that trade with the company owned by that investor. In both scenarios, the motivation for cross-ownership is usually to strengthen relationships and business ties between the parties involved and to control the level of competition that exists in the marketplace.
Strong cross-ownership is said to exist when a single owner has control of multiple companies that account for a significant amount of a given market. For example, if a company owns a few television stations, several major radio stations, and a major newspaper serving a specific community, that company would be engaging in a cross-ownership strategy. This means that while there is still some competition in this market, it is kept to a minimum and allows the corporation to freely use its resources to capture a larger share of this market. In some nations, this specific high concentration of cross-ownership is known as circular ownership, referring to the fact that the corporation’s properties are found throughout the community.
Cross-ownership can occur in other industry settings. A communications company may have as its core business the sale of long-distance services, in addition to having another company that focuses on providing automated conferencing services that utilize the owner’s network to provide these services. Likewise, the same communications company may offer fax transmission services using the network.
Another example of cross-ownership can occur in the fast food industry. A single owner can operate a hamburger chain, a pizza chain, and a chain that specializes in foods like Mexican dishes or fried chicken. In a given community, the owner can build one of each of these restaurants to capture a larger market share and use the restaurant supplies provided by a restaurant supply company that is also under the ownership of the same entity. The result is a strong market position, lower costs due to volume purchases or supplies, and a degree of protection against changes in the economy.
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