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Originally Posted by Beingist  I'll admit, aelle, this is a nice illustration of how and ostensibly why companies buy other companies, but in my experience in businesses, I have found it more likely that the real motive of any of these companies is not serve anyone, but to make a profit from selling, in this case, apples. |
How else do you make a profit than by providing something that customers want to buy, for the price at which they want to buy it? And isn't offering what people want the definition of "providing value"?
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Originally Posted by Beingist In any event, I wasn't really asking about buying companies, but rather trading stock in companies. Even if we compare buying stock in companies to buying companies outright, I still don't see the need, as long as company A can continue to produce apples. If there is no company B to make the tools, there's always another company that does, else A wouldn't have been able to produce the apples in the first place (unless, of course, B is a monopoly, which would hardly signify its impending death). |
Sorry if I was unclear, I wasn't talking about buying companies either. I was talking about the B2B market: companies providing services or products to other companies - selling fertilizer to a farm, selling shipping services or retail services, selling law services, bookkeeping services, etc. They're all different companies, with corporate clients instead of individual clients.
As for the specific industry of trading, Peterw gave an example of a service it provides to other industries: liquidity. Liquidity means how easily you can sell an asset, or in other words, how quickly you can sell it without radically changing the market price. A house is very illiquid: if you want to sell it really fast, you have to really underprice it. Currencies are very liquid: you can go to the bank any day of the week to exchange your euros for dollars without even being noticed by the market. As a result, the euro/dollar rate is very easy to know with a very high certainty, while it's hard to know for sure when and how much your house will sell for.
Now, it's hard to illustrate how liquidity benefits the apple industry, to stick to my previous example, but it certainly is a benefit to commodity industries. A corporation that manufactures steel will greatly benefit from a liquid steel market (more certainty, more fluidity, less costs), which will benefit the companies they sell steel to, which will eventually benefit the consumer with bridges, buildings and railways built when needed for the most reasonable price.
Actually, many large corporations who extract/refine/manufacture commodities will also have commodity trading desks. (Hm. Is that everywhere or just in Asia?)