What are the advantages of synergy effects

Synergy effect

A synergy effect is a positive effect that results from the merger or cooperation of two or more organizations (companies). Synergy effects are competitive advantages that are mostly achieved through cost savings, e.g. through overlapping in the development of two new products in a large company than through separate development in two different (one-product) companies. A synergy effect consists of the interaction of factors that promote each other or, together, do more than each of them on its own.

A synergy effect can occur
1. Diversified companies that are active in various product markets (so-called multi-product companies), and
2. in a business combination (merger, mergers & acquisitions).

Synergy effects can therefore be achieved through the shared use of resources or sales channels.
In portfolio analysis (product portfolio) as well as in strategic planning, the optimal combination for the joint use of resources is always up for discussion.

In the case of a company merger, potential synergy effects must often serve as a reason; however, practice has shown in the vast majority of cases that the desired synergy effects are much smaller than desired. In such cases, synergies can often only be enforced by laying off workers.

Synergy effect stands for the hope that a whole is worth more through its cooperation than the sum of its parts that remain separate (synergy, Greek = cooperation).

Problem:
It is questionable whether the amalgamation of large companies to form even larger ones will produce a positive synergy effect in all cases.

Example:
A positive synergy effect can arise
* in production through fixed cost degression;
* in sales by sharing distribution channels and customer service facilities;
* in research and development through joint R&D facilities.

A negative synergy effect can arise
* in production due to insufficient utilization of systems;
* in sales due to loss of image and profile of the acquired company;
* in research and development due to R&D facilities that are too large and confusing.

In the economy, cooperation between companies and company mergers is often justified with synergy effects.

The term synergy comes from the Greek language and means "working together". In the field of economics, synergy effects are understood to be the greater or lesser overall effect of an integrated use of instruments compared to the sum of their individual effects. The terms radiation effects or composite effects are often used synonymously.

A distinction is made between the synergy effects according to operational functions:
- sales synergies,
- surgical synergies,
- management synergies,
- investment synergies,

Marketing in particular proves to be an area in which there are great opportunities to use synergies, i.e. great synergy potentials. The type and number of synergy potentials play a decisive role in diversification decisions (growth strategies; gap analysis), merger decisions as well as in the choice of an organizational structure.

The expected positive synergy effects are a major cause of the increasing willingness to enter into cooperation and strategic alliances (alliances, strategic), in which the merging of specific capabilities of each partner (»X alliances«) or an increase in critical masses (»Y -Alliances «) synergy effects can arise.

Against the background of the cooperation, the synergy has a certain catalytic effect in addition to the positive »2 + 2 = 5 - effect«, ie not only is the overall success of the synergy partners greater than the sum of the individual successes, but certain projects can only be of their kind come about through synergy.

The task of synergy management can generally be mentioned as the early detection of positive synergy potentials as well as the selection and initiation of measures for the long-term development of this potential (potential planning). In connection with acquisitions, Kogeler (1992, Synergieeffekt 5ff. And Synergieeffekt 235) understands synergy management as a process that includes all acquisition-specific management measures prior to the purchase, measures for integration as well as instruments for corrective countermeasures, with the aim of determining the likelihood of success of an acquisition to increase. In this context, Kogeler (1992, Synergieeffekt 238) emphasizes in particular good interface management as "... an indispensable prerequisite for the implementation of certain measures in the integration process", which may require far-reaching changes in the planning and information system (especially in reporting and controlling) of the organizational system in the integration process (cf. Kogeler, 1992, Synergieeffekt 209ff.).

Phenomenon that an entity, e.g. B. a diversified company or its product range, is worth more or makes a higher contribution to success than the sum of its parts, if they were isolated from each other. In particular with horizontal diversification, the capacities, e.g. B. in research and development, production and distribution, more and more evenly over time, and economies of scale achieved, and existing technical and commercial know-how can also be used in new fields of activity (economies of scope). One enjoys a stronger market position in procurement and sales markets; In addition, you benefit from the effects of the image transfer and the demand network.

The synergy effect means that the total effect of the sum of the combined means used is greater than the sum of the partial effects, if these are used individually. The interaction of the individual funds leads to an increase in effectiveness due to the existing interdependencies, the amount of which depends on the way in which the material and formal linkage of the funds is made. These additional effects, which are used, for example, in the context of sales policy or procurement policy through a marketing mix, are referred to as synergistic effects of a combination of means.

Similar terms: synergetic effects, synergy effects, synergies, economies of scope, economies of scope

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