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I dont quite get the synergy concept and is it true that if unrelated companies integrate synergy would be less
Synergy is where two companies together are more profitable than operating separately.
Higher profits can arise from:
1 Saving costs, or
2 Increasing revenueThese can happen if the companies have related activities. For example, a supermarket combining with a logistics company might increase delivery efficiency. However, if the companies are truly unrelated (like a supermarket combining with an aircraft manufacturer) it is hard to see how costs could be saved or revenues increased by the merger. They are just too different to allow, for example, departments to be merged or cross-selling to take place.
Hello Sir,
Could you please explain me what is meant by “cross subsidise” ?
Thanks in advance
A profitable bit of the business providing money to a loss-making bit.
EG Product A makes a profit, but Product B doesn’t. However, the ocmpany is reluctant to withdraw B because that would damage customer service. Therefore, it uses the profits form A to allow it to sell B at a loss.
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