Rise and fall of conglomerates
We've written about this before, but the question remains is why did big, miscellaneous conglomerates rose in the 1960s then fade away in the 1980s? Companies like Gulf + Western, ICC, and others that prided themselves on their expertise at handling such a variety of businesses disappeared and others like Textron cut way back. While we now have giant firms, most of them (with the exception of Japanese companies) have such a scattershot approach.
There are some theories on this in the book The Corporate Commonwealth (Louis Galambos and Joseph Pratt, Basic Books, 1988). According to the authors, conglomerates were a result of the new structure of postwar American corporations, in which a centralized staff most involved with financial results held sway over a number of distinct operations, quasi-independent units whose main connection to headquarters was in reporting financial results.
The growing sophistication of financial controls also helped ease business into the conglomerate merger craze of the 1960s. Using these tools, a relatively small central staff could coordinate the allocation of resources among numerous unrelated subsidiaries. In some instances, conglomeration proved spectacularly successful in providing profits. To firms in markets that were leveling odd, conglomeration provided an escape from the lower profit margins associated with the last phase of the product cycle. (pp.196-197).
But of necessity, this desire to allocate resources was a failure at real innovation and product improvement. It can be argued that none of he conglomerates really cared about the products they produced or developed and passion for the industry they were in. This led to a simple rearrangement of what was already there.
That strategy started to fail when new, product- and process-centric ideas started invading the US market from abroad and from inside. In every area the conglomerates failed to provide innovative products or customer service that matched new, aggressive rivals that really knew their businesses. Automobiles and electronics were just two examples where outsiders took over the market from passive American companies.
But along with this type of company [the conglomerate], came a new attitude to management. Instead of being product- or services-centered, as the best managers had been when companies were involved in a single line of business, serving just a few closely related markets, the top executives of highly diversified conglomerates approached their jobs as portfolio asset managers. They had neither the time nor the incentive to develop an intimate knowledge of a single product, service, or market. They tended to be dedicated to short-term earnings and insensitive to long-term growth patterns and the position of their companies to achieve long-term to achieve market and technological advantages.(pp. 229-230)
This explains the panic about Japanese management styles and the decline of US business in the 70s and early 80s. The secret was not in early morning calisthenics or Zen Buddhism, but into de-conglomeratization, a sell-off or spin-off of unconnected businesses to more product- and service-focused companies, something that happened rapidly and which helped US firms regain competitive edge.
The new oligopoly came out of this lesson learned, and the idea of creating a company with the power of a conglomerate but with the focus of a concentrated, single-industry company. The pressure and desire to build an empire constantly tempts these companies ( like Vivendi and Time-Warner) to overreach and build a conglomerate, but the punishment is generally facts and definitive.
7:49:38 PM 
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