Cross ownership is a type of business arrangement in which a single entity owns two or more businesses 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 stock in several different companies that do business with the company owned by that investor. In both scenarios, the motivation for cross ownership is usually to strengthen business relationships and ties between the parties involved, and to control the level of competition that exists within the marketplace.
A heavy cross ownership is said to exist when a single owner has control of a number of companies that account for a significant amount of a given market. For example, if a corporation happens to own a couple of broadcast television stations, several of the key radio stations, and a main newspaper that serves a specific community, that corporation would be engaging in a cross ownership strategy. Doing so means that while there is still some competition in that market, it is kept to a minimum, and allows the corporation to freely use its resources to capture an overall greater share of that market. In some nations, this particular high concentration of cross ownership is known as circular ownership, referring to the fact that the holdings of the corporation are found all around the community.
Cross ownership can occur in other industry settings. A communications company may have as its main business the sale of long distance services, while also owning another business that focuses on providing auto conferencing services that make use of the owner’s network to provide those services. In like manner, that same communications company may offer fax broadcasting services utilizing the network.
Another example of cross ownership can occur in the fast food industry. A single owner may operate a hamburger chain, a chain of pizza parlors, and a chain that specializes in foods such as Mexican dishes or fried chicken. In a given community, the owner may build one of each of those restaurants in order to capture a greater 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 position in the market, lower costs due to volume purchasing or supplies, and a certain degree of protection from shifts in the economy.