Skip to main content

Disadvantages of Holding Companies

Holding companies do not free from some limitation. Some limitations or disadvantages of holding companies are given below:

  • Monopoly: Holding company may develop into a monopoly to swindle excessive profits by manipulated control over the market. The questions of economics remains in the background while desire for monopoly power colours its policies. There is possibilities of social interest being ignored by the holding companie's craze for dominance.
  • No corresponding liability: Holding company has concentrated power of control over subsidiaries. But there is no corresponding liability or responsibility pinpointed on it for achieving any precise operating results or profits. Control without accountability for results may prove detrimental to the interests of the group.
  • Keep away from risks: Holding company may try to shirk its responsibility and to keep away from the risks by selling its holding in the subsidiaries at the critical times.
  • Keen interest in the affairs: Since control is concentrated in holding company, those managers who are in charge of the subsidiaries may not even keen interest in the affairs. They may not show business initiative as there is no direct incentive for them to put in deligent efforts for managing their units. Thus, managerial efficiency at operation level may not be maintained to the expected extent.
  • No separate administration for subsidiaries: Since identity of subsidiary companies has to be frmally retained it becomes necessary to continue seperate administrative set up maintaining accounts documents etc. This limits the administrative economics available to a holding company.
  • No perfect integration: Perfect integration may not become a reality because of persisting internal frictions and tussels among the component subsidiaries.
  • Over capitalised: With the ploding of capital of different subsidiaries. Holding company may find itself over capitalised over - capitalisation is a token of under utilization of excessive overheads costs, wastage of reserves etc.

Comments

Popular posts from this blog

Why is Scandinavia so expensive ?

Hi I am Deepjit Karmakar, founder of thecommercialinfo.com and today here in this article I am gonna tell you why Scandinavia is so expensive. Across scandinavia, the average price of everything from a knitted  pay roll neck pastries from the local bakery are some of the highest in the world. Scandinavia is a region in Northern Europe that was a historical e made up of three kingdoms: Norway, Sweden and Denmark. They are United by their Viking heritage but also their shared reputation as one of the most expensive regions to live and visit. Whether it's buying a car or a TV. Consumers in Scandinavia pay some of the highest prices in the world. Even buying groceries is costly with all three countries' food and drink prices above the European average. All three countries also have a standard  VAT rate of 25%. Amongst all the European Nations, only Hungary has a higher rate. Heading to the bar is also pretty pricey. In Norway, having a beer or glass of wine will cost in ×2.5 times

Why is Singapore so rich and developed

 Hii! I am Deepjit Karmakar and today here in this article i am gonna tell you that why Singapore is so rich and developed. So, without wasting time let's get started. Singapore: Singapore is a tiny country, so tiny you can drive accross the island in just one hour. Despite its size and lack of natural resources, Singapore's 5.6 million people enjoy one of the highest average incomes in the world, ahead of countries like Germany, France and Japan. So, how did this little island get so rich?  Xiaomi 11 Lite NE 5G (Diamond Dazzle 6GB RAM 128 GB Storage) | Slimmest (6.81mm) & Lightest (158g) 5G Smartphone Explained:  Singapore doesn't have resources like coal or oil but it does have something which countries can't buy, location. The island sits in the middle of an important trade route connecting Asia to Europe. That's the key reason why the British decided, back in 1819, to set up a colony in Singapore. Location isn't everything though. There are several count

Japanese Management Approach

  Fossil Chronograph White Dial Men's Watch-CH2882 Amazon's Choice for "fossil watches for men" 16% off Japan has emerged as a world leader in industrial development. Today japan has great commercuial success. The japanese 'economic miracle' has attracted the attention from east and west. In this respect, many countries are turning to the japanese style of management. Although the entire japanese style of management may not be applicable to all nations due to social and cultural differences, certain characteristics features may find wide applicability. The roots of unique practices and style of Japanese management are as follows- (a) Groupism : Groups are the primary social unit throughout japan. Without getting the consensus of his group, the leader of a group can't do anything. In japan, self is seen as part of a group. (b) Confucianism : It is a descipline of life-style. It emphasizes the importance of loyalty to a boss, obedience to a senior person, th