SYNERGIES Flashcards
How and when do sinergies occur
Synergies occur as a result of external growth when the combined strengths of two businesses lead to greater benefits for the new organisation. - The strengths compliment each other
Example of synergies in use
An example of this would be Sainsburies and Argos - A major reason Sainsburies bought Argod was for its delivery network. As it looked to deliver goods to customers quicker than rivals such as amazon. So Sainsburies bought the logistics supply chain from Argos, now Argod appears in Sainsbury’s stores, and overall they get more reach, which leads to increases in revenue.
What are different types of synergies
Revenue synergies
Cost synergies
Evelution points
What are revenue synergies
Open up new markets
Using new distribution channels
Selling complementary goods ]
Sharing corporate learning to improve innovation and marketing
What are cost synergies
Economies of scale (purchasing, managerial etc)
Integration of functional activities - For example: Do you need to have 2 marketing teams in Sainsburies and Argos? Could you not just cherry pick the best employees and put them in one team.
Synergies occur as a result of what
Synergies occur as a result of external growth when the combined strengths of two organisations lead to compounded benefits for the new organisation.
What are evelution points
Successful takeovers depend on realising synergies. These are often more complex to achieve than it may be assumed.
Often cost synergies involve reducing the size of the workforce. Valuable skills may be lost, and there could be an impact on motivation.
Often an increase in the size of a company can lead to economies of scale - depends on where the economy is producing in relation to the minimum efficient scale (MES) - Could cause the average price to go up via a synergy of 2 companies, as things may not go to plan.
