BBA 3rd Year concept Of Synergy Long Question Answer

BBA 3rd Year concept Of Synergy Long Question Answer

Attempts to develop and maintain distinctive competencies at the corporate level focus on generating superior human, financial and technological resources; designing effective organisational structures and processes; and seeking synergy among the firm’s various businesses. Synergy can provide a major competitive advantage for firms where related businesses share R&D investments, product or production technologies, distribution channels, a common salesforce and/or promotional themes-as in the case of IBM.

Business Level Strategy: How a business unit competes within its industry is the critical focus of business level strategy. A major issue in a business strategy is that of sustainable competitive advantage. What distinctive competencies can give the business unit a competitive advantage? And which of those competencies best match the needs and wants of the customers in the business’s target segment(s), e.g. a business with low cost sources of supply and efficient, modern plants might adopt a low cost competitive strategy. One with a strong marketing department and a competent salesforce may compete by offering superior customer service.

Another important issue a business level strategy must address is appropriate scope, how many and which market segments to compete in and the overall breadth of product offerings and marketing programmes to appeal to these segments. Finally, synergy should be sought across product markets and across functional departments within the business.

3. Marketing Strategy: The primary focus of marketing strategy is to effectively allocate and coordinate marketing resources and activities to accomplish the firm’s objectives within a specific product market. Therefore, the critical issue concerning the scope of a marketing strategy is specifying the target market(s) for a particular product or product line. Next, firms seek competitive advantage and synergy through a well-integrated programme of marketing mix elements (primarily the 4Ps of product, price, place and promotion) tailored to the needs and wants of potential customers in that.

Relevance of Synergy

Synergy can provide a big boost to the bottom line of most large companies. The challenge is to separate the real opportunities from the illusions. With a more disciplined approach, executives can realise greater value from synergy, even while pursuing fewer initiatives. There are the following benefits that a company get from synergy:

1.Shared Know-How: Combined units often benefit from sharing knowledge or skills. This is a leveraging of core competencies, e.g. one reason that Procter & Gamble purchased Gillette was to combine P&G’s knowledge of the female consumer with Gillete’s knowledge of the male consumer.

2. Coordinated Strategies: Aligning the business strategies of two or more business units may provide a corporation significant advantage by reducing inter-unit competition and developing a coordinated response to common competitors (horizontal strategy). The merger between Arcelor and Mittal Steel, e.g. gave the combined company enhanced R&D capabilities and wider global coverage while presenting a common face to the market.

3. Shared Tangible Resources: Combined units can sometimes save money by shari’s resources, such as a common manufacturing facility or R&D lab, e.g. the alliance between Renault and Nissan allowed it to build new factories that would build both Nissan and Renault vehicles.

4. Economies of Scale or Scope: Coordinating the flow of products or services of one unit with that of another unit can reduce inventory, increase capacity utilisation and improve market access. This was a reason Delta Airlines bought Northwest Airlines.

5. Vertical Integration: Coordinating the flow of products or services from one unit to another can reduce inventory costs, speed product development, increase capacity utilisation and improve market access. In process industries such as petrochemicals and forest products, well-managed vertical integration can yield particularly large benefits.

6. Combined Business Creation: The creation of new businesses can be facilitated by combining know-how from different units, by extracting discrete activities from various units and combining them in a new unit, or by establishing internal joint ventures or alliances. As a result of the business world’s increased concern for corporate regeneration and growth.

7.Pooled Negotiating Power: Combined units can combine their purchasing to gain rover common suppliers to reduce costs and improve quality. The same can be done with common distributors. For example, the acquisitions of Macy’s and the May company enabled Federated Department Stores (which changed its name to Macy’s in 2007) to gain purchasing economies for all of its stores.

8. New Business Creation: Exchanging knowledge and skills can facilitate new Products or services by extracting discrete activities from various units and combining them in a new unit or by establishin joint ventures among internal business units. For example, Oracle Purchased a number of software companies in order to create a suite of software code named ‘Project Fusion’ to help corporations run everything from accounting and sales to customer relations and supply chain management.

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