The banking industry generated $7.1 trillion globally last year, making 25% of the world’s GDP. In the last 20 years, the financial services sector has more than doubled in size, indicating a growth in the economy and a shift in market forces. With this growth, large conglomerates have, perhaps forcibly, developed their banking divisions to enter the lucrative trade.

Let’s take a look at Apple, for example. Originally a personal computer distributor, the multinational corporation has evolved into a comprehensive technology and software company, even offering financial services like Apple Card. Apple isn’t the largest company by size, though: that title belongs to Walmart, as since 2014, it has been the world’s most profitable company, second only to the oil mining company Saudi Aramco.

“Apple’s foray into banking services demonstrates how technology firms are redefining the boundaries of traditional industries,” junior Jonathan Misaghi said. “However, regulatory missteps, such as those highlighted by Apple Card, remind us of the challenges in entering unfamiliar territory.”

There are plenty more like Apple: Alphabet, Microsoft, Meta and Amazon are all in the top 10 of the world’s most profitable companies, and they have all seen a surge in profits when expanding their consumer base to reach new markets.

Even Netflix, historically a streaming service, is entering the sports industry by broadcasting the U.F.C. fight between Mike Tyson and Jake Paul.

It’s no secret–more customers generate more income. But sometimes, a company’s soaring stock can plummet into a fiasco without warning.

“Walmart’s dominance as the most profitable company shows the enduring power of economies of scale,” sophomore Nathan Zhong said. “It’s a testament to how consistent operational efficiency can outpace even the most innovative tech firms in profitability.”

In 2005, General Electric, the largest conglomerate in the world at the time, was composed of four main sectors: aerospace, healthcare, finance and energy. In the 2008 financial crisis, GE incurred significant losses to GE Capital, its previously most profitable subsidiary, which threatened the existence of the company. CEO Lawrence Culp Jr dissolved it into three separate companies in April 2024.

“By creating three industry-leading, global public companies, each can benefit from greater focus, tailored capital allocation, and strategic flexibility,” Culp said. “[This will enable us to] drive long-term growth and value for customers, investors, and employees.”

Similarly in Nov. 2024, the Honeywell board of directors received a letter from Elliott Investment Management, a feared activist investor run by Paul Singer. The letter announced to the board that the management firm had taken a $5 billion stake in the company, calling for Honeywell to break itself up into an aerospace company and a separate automation company. Investors seemed pleased with the idea, sending Honeywell’s shares up by 4% on the day of the announcement.

GE’s history has been cited as evidence by Elliott Investment Management, a multinational conglomerate that initially invested in hot water heat generators, that conglomerates can grow so large and diverse that their complexity becomes a liability.

“Elliott Investment Management’s stake in Honeywell is a clear signal that even the most successful conglomerates must justify their complexity,” senior Alex Amir said.

The activist investor has argued that expanding across unrelated industries may seem profitable initially, but it exposes the organization to disproportionate risks. A crisis in one division, as seen with GE Capital during the 2008 financial crash, can jeopardize the entire company. Oversized conglomerates often need help with inefficiency, lack of focus, and difficulties in adapting to market changes.

Honeywell now finds itself at a crossroads, with activist investors like Elliott Investment Management pushing for a breakup to unlock greater value. While the company has yet to signal any intent to dissolve, the situation highlights a broader trend in corporate strategy.

Investors and analysts alike will be watching closely, as Honeywell’s response could set the tone for how conglomerates navigate the pressures of specialization and shareholder expectations in a rapidly evolving market. The story of conglomerates like GE and the pressures now facing Honeywell underscore a vital lesson: no company is truly “too big to fail,” at least not if it adjusts to an evolving market in a timely fashion.

Diversification can bring growth and resilience, but unchecked complexity and overreach often lead to vulnerability. In an era of rapid market shifts and heightened investor scrutiny, the path to long-term success may lie not in how much a company expands, but in refining and leveraging its most competitive assets.