Essay - Strategic Management - Strategic Synergy the Ultimate Goal of any...

Strategic Management - Strategic Synergy

***** ultimate goal of any company is to increase its profits and consolidate its market positions and in doing so, they develop wide series of strategies. A most commonly used such strategy is given by the joining of forces in numerous alliances as to best benefit from the comparative advantages of each entity. These unions *****ten take the form of mergers and acquisitions and ***** are beneficial as they create a strategic synergy. The strategic synergy encompasses the benefits derived ***** the joining of forces ***** two or more companies and has often been assimilated with the simple equation of 2 + ***** = 5. This basically means that when put toge*****r, ***** companies add up to more value, more core competencies ***** a stronger and better consolidated position on the market than any one of them could have achieved on its own. The ***** synergy can be used to generate three main effects:

***** creati***** of economies ***** scale the ***** together of complementary skills, and the dissemination of core competencies

***** of scale

Economies of scale occur when a single entity or group ***** entities possesses the necessary skills, resources and capabilities to control an entire industry on its own. This comp*****y or ***** has *****d access ***** all types of resources ***** is able to manufacture and sell products at extremely low and uncompetitive prices. The competition is ***** crushed and the situ*****ion ***** ***** compared to monopolistic practices and it is being accordingly criticized.

***** *****re are various causes at the bas***** of scale economies, ***** of *****se causes could easily be the strategic synergy. In this situation, two or more companies activating in the same ***** can chose to work ***** ***** detain monopoly on ***** market. Even if the situation could occur in the case of complementary products and services, it is most ***** met ***** the case of similar if not competitive products. The *****rs often possess complementary skills which ***** *****n combine to retrieve the most favorable result. By engaging in supporting activities, the two companies ***** better able ***** reduce manufacturing ***** operational costs, increase as ***** the number of customers, ***** the position held by the competitors and strengthen their own market ***** - ***** to lead to the creation of economies ***** scale.

***** best understand how strategic synergies ***** lead to the *****ation of scale economies, ***** the example of ***** major IT ***** on the Japanese market. These two hardware manufacturers possess *****gether 80 percent of the entire market, with 50 percent the first and 30 percent the sec*****d manufacturer. They both represent a forceful competitor for ***** other, but ***** they join *****, ***** will be *****ble to control the market. They will be better able to satisfy the needs of their combined customers, improve the quality of their products and services ***** reduce the manufacturing time and the retail price to the end consumer. The remaining companies, ***** a 20