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Synergy

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32 views9 pages

Synergy

Uploaded by

satywank15
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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University School of Business

BBA
Bachelor of Business Administration
STRATEGIC MANAGEMNET 22BAT-332

Dr. Neba Bhalla DISCOVER . LEARN . EMPOWER


Synergy

Course Outcome
CO Title Level
Number
CO2 To apply principles associated with strategy Understand
formulation and implementation.

CO3 To analyze real world corporate problems related Application


to strategic decision making.

CO4 To assess company’s business environment using Application


environmental scanning tools.

2
What Is Synergy?
• Synergy is the concept that the combined value and performance of two companies will be greater
than the sum of the separate individual parts. Synergy is a term that is most commonly used in the
context of mergers and acquisitions (M&A).

• Synergy, or the potential financial benefit achieved through the combining of companies, is often
a driving force behind a merger

• Synergy is the concept that the value and performance of two companies combined will be greater
than the sum of the separate individual parts. If two companies can merge to create greater efficiency
or scale, the result is what is sometimes referred to as a synergy merge.

• The expected synergy achieved through a merger can be attributed to various factors, such as
increased revenues, combined talent and technology, and cost reduction.
3
Understanding Synergy
• Mergers and acquisitions (M&A) are made with the goal of improving the

company's financial performance for the shareholders. Two businesses can

merge to form one company that is capable of producing more revenue than either

could have been able to independently, or to create one company that is able to

eliminate or streamline redundant processes, resulting in significant cost reduction.

• Because of this principle, the potential synergy is examined during the M&A

process. If two companies can merge to create greater efficiency or scale, the result

is what is sometimes referred to as a synergy merge. 4


Types of Synergy
1. In addition to merging with another company, a company may also attempt to create synergy

by combining products or markets. For example, a retail business that sells clothes may decide

to cross-sell products by offering accessories, such as jewelry or belts, to increase revenue.

2. A company can also achieve synergy by setting up cross-disciplinary workgroups, in which

each member of the team brings with them a unique skill set or experience. For example, a

product development team may consist of marketers, analysts, and research and

development (R&D) experts.

This team formation could result in increased capacity and workflow and, ultimately, a better

product than all the team members could produce if they work separately.
5
Contd..
3. Synergy is reflected on a company's balance sheet through its goodwill

account. Goodwill is an intangible asset that represents the portion of the business value that

cannot be attributed to other business assets. Examples of goodwill include a company's

brand recognition, proprietary or intellectual property, and good customer relationships.

4. Synergies may not necessarily have a monetary value but could reduce the costs of sales

and increase profit margin or future growth. In order for synergy to have an effect on the

value, it must produce higher cash flows from existing assets, higher expected growth rates,

longer growth periods, or lower cost of capital.


6
References

• http://www.businessnewsdaily.com/3882-vision-statement.html
• http://iveybusinessjournal.com/publication/what-is-corporate-strategy-really
/

• http://www.quickmba.com/strategy/levels/
• http://smallbusiness.chron.com/advantages-disadvantages-corporate-strat
egy-diversification-62119.html

• https://www.linkedin.com/pulse/defining-terms-vision-mission-goals-objecti
ves-fareed
ASSESSMENT MODEL

8
THANK YOU

For queries
Email: neba.e14239@cumail.in

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