What is a group of companies? How does it work? What challenges does it face? And above all, how do you choose the right group to work with? So many questions to be answered with successful examples.
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Table of contents
What is a group of companies and how does it work?
A group of companies is a set of companies linked to each other by a relationship of control, direction and coordination by a parent company, called in some cases a holding company.
In a group of companies, companies work together to achieve common goals, such as reducing costs and improving the quality of products/services.
For example, a large company may create a group with other companies complementary to its own, such as suppliers or distributors, in order to gain access to resources and expertise it does not possess. Competitive advantages of a certain kind, such as increasing production capacity or entering new markets, can thus be achieved.
The functioning of groups of companies, however, is not simple: decisions have to be taken by mutual agreement and there has to be a strong cohesion between the companies of the group in order to be able to achieve their objectives. It is a matter of working out a common strategy, optimising available resources.
Challenges of a group of companies
Working with a group of companies can improve one’s competitiveness; however, there is no shortage of challenges. There are organisational issues: how to coordinate production
processes, manage human and financial resources and share expertise among group members. Then there is the issue of leadership: who assumes the role of group leader and how are decisions made in a shared manner? Lastly, how to deal with cultural and/or mental differences between different companies, which would lead to friction and internal conflicts?
A cluster of companies is a complex system; it requires strong collaboration skills and a common vision. If managed correctly, however, it can represent a valuable opportunity for innovation and growth for each company, as well as for the cluster as a whole.
Advantages
Being part of a group of companies can provide countless advantages, both for individual companies and for the parent company. Let’s see which ones.
1. Diversification
Operating in several sectors with several activities reduces the risk of depending on one market and, at the same time, exploits all opportunities for growth and innovation.
2. Economies of scale
Sharing infrastructure, services, suppliers, technology and know-how leads to one benefit: cost reduction.
3. Synergies
A group of companies succeeds in creating value through the complementarity and integration of its constituent companies.
4. Additional sources of financing
Clusters find it easier to gain access to additional sources of financing, which take advantage of the capital strength and reputation, accumulated over the years, of the leader.
5. Taxation
Groups of companies can more easily take advantage of tax benefits under current legislation, such as the tax consolidation scheme, which allows the losses of one company to be offset against the profits of another company in the group.
3 known successful examples of company groups
In the business world, there are numerous examples of success. Here are three well-known ones:
1. Volkswagen
Volkswagen, which includes brands such as Audi, Porsche and Skoda, has been able to exploit the complementary activities of the different companies to become one of the world’s leading car manufacturers.
2. Nestlé
Another famous group is Nestlé, which has created a global network of complementary food companies to offer high quality products in different market sectors.
3. LVMH
Again, the LVMH group, which includes brands such as Louis Vuitton and Dior, has managed to create a synergy between its various activities to become a world leader in luxury.
Success stories like the ones mentioned here prove that clusters can be a winning solution to meet the challenges of the 21st century and grow sustainably.
How to choose the right group for you
Trusting the right group of companies is not easy… there are, however, a few factors to consider. First of all, one must assess the complementarity of the activities carried out by the companies in the group with one’s own business; it is important that there is a convergence of interests and objectives.
Secondly, one has to check the reputation of the companies in the group and their financial soundness in order to avoid unnecessary risks.
Third, the level of coordination and collaboration among group members should be assessed: it is important that there is an effective sharing of knowledge and expertise to achieve concrete results. Finally, the group’s governance arrangements and the degree of involvement of members in strategic decisions should not be underestimated.
Choose JO Group, the European group of companies that has been innovating since ‘98
JO Group is a cluster of companies that from the very beginning has made technological innovation and continuous learning the driving force behind its activities. It encompasses different realities, each of which has a precise field of application; but all have as their lowest common denominator the desire to innovate and make digital transformation their mantra.
Areas of expertise range from the development of FAD platforms and serious games to the conversion of online courses into SCORM format, from consulting on European projects to web marketing. There is also ICT research and development (augmented and virtual reality, blockchain, artificial intelligence, big data and IoT), e-health, app development, agritech, software for environmental technologies, and the promotion of digital transformation and European citizenship.
With JO Group’s services and products, you can make your every wish come true. Contact us
to find out more! JO Group is #borntoinnovate.