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BUSINESS GROWTH AND COMBINATIONS






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Forms of combinations

Combinations may take several forms which may be classified as follows

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Circular or mixed integration

When there is integration of business units which are remotely connected with one another in their production and sales circular integration is achieved. The remote connection may be found between products requiring similar manufacturing processes or using the same marketing or trade channels.

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Diagonal or services combination

It means integration of a main activity or process with ancillary activities and services. For instance, a newspaper company may integrate with transport company to ensure timely delivery of the newspaper to different parts of the country or an automobile plant may combine with a power generating unit.

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Lateral or allied combination

It refers to the integration of business units producing an selling different but allied products. The lateral combination may be either convergent or divergent. Convergent lateral combination arises when firms producing different products but supplying to a common user join with him.

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Difference between horizontal integration and vertical integration

Horizontal integration differs from vertical integration in regard to the following

Click to read - Difference between horizontal integration and vertical integration

Vertical combination

It is also known as sequence or industry or process integration. It arises as a result of integration of those business enterprises which are engaged in different stages of production of a product.

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Horizontal combination

It is also known as parallel or trade unit integration. It is effected by units engaged in manufacturing similar products or rendering similar services.

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Types of combinations

Broadly speaking, combinations may be of the following types: Horizontal, Vertical, Lateral, Circular, and Diagonal.

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Evaluation of benefits and evils of combinations

There are many benefits of combinations to the business community and the society. Because of their large scale operations, they reap the economies in production, marketing, financing and management. Thus, the cost of production per unit of a combination is reduced considerably. The consumers will be benefited if the benefits of large scale are passed on them.

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Evils of combinations

Combinations are stated to be harmful form the point of view of consumers and society as discussed below

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Benefits of combinations

Combinations are beneficial not only for the manufacturers, but also for the consumers. Combination by reducing costs offers goods and services at lower price to the consumers.

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Causes of combinations

The causes of combinations are as follows

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Business combination

Whenever two or more business units engaged in the same line of business or in different related processes or stages of the same line of business unite or associate together with a view to carry on their activities and shape their policies on common and coordinated basis for mutual benefit, they are said to form a business combination.

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Limitations of Integrative growth strategy (growth by combination)

The limitations of integrative growth strategy are as under

Click to read - Limitations of Integrative growth strategy (growth by combination)

Advantages of Integrative growth strategy (growth by combination)

The merits of integrative growth strategy are as under

Click to read - Advantages of Integrative growth strategy (growth by combination)

Integrative growth strategy (growth by combination)

It is strategy of growth by combination. Two or more firms may decide to combine or merge to form a bigger enterprise.

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Limitations of Diversification strategy

The limitations of diversification are as given below

Click to read - Limitations of Diversification strategy

Advantages of Diversification strategy

The advantages of diversification strategy are as under

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Diversification strategy

Under this growth strategy, the company seeks increased sales by developing new products for new products for new markets. The diversification does not add variety in any one product but introduces entirely different types of products.

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Limitations of Intensive growth strategy

The limitations of intensive growth strategy are as under

Click to read - Limitations of Intensive growth strategy

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