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Concept Map 3

The document discusses different types and forms of business combinations including horizontal, vertical, lateral, and diagonal combinations. It describes combinations such as associations, federations, consolidations, mergers, acquisitions, and amalgamations. Some key reasons for business combinations are to eliminate competition, achieve economies of scale, and gain access to technology and research facilities. Potential advantages include increased capital and market share, while disadvantages can include high costs and creation of monopolies.

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mike ranin
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72 views

Concept Map 3

The document discusses different types and forms of business combinations including horizontal, vertical, lateral, and diagonal combinations. It describes combinations such as associations, federations, consolidations, mergers, acquisitions, and amalgamations. Some key reasons for business combinations are to eliminate competition, achieve economies of scale, and gain access to technology and research facilities. Potential advantages include increased capital and market share, while disadvantages can include high costs and creation of monopolies.

Uploaded by

mike ranin
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Classifications
of Business
Combinations
Types of Business Combination

• Horizontal Combination - Two or more businesses of the same


product or trade combines.
• Vertical Combination – One or more stages of the production or
distribution is controlled by one company.
• Lateral Combination – Two or more firms with different kinds of
product combines.
• Diagonal Combination – combination of the main unit engage in
production is combined with the support unit.
• Circular Combination -
Forms of Business Combination

• Association
1. Trade Association
- A not for profit association consists of individuals or companies with
common interests, who acts as a representative for the industry they are
in.
2. Chamber of Commerce
- Association in a particular place that protects and promotes the interest of
the businesses in the community or place.
3. Informal Agreement
- Formed solely based on trust of all parties involved to set restrictions of
output, fixation of prices, and etc.
Forms of Business Combination

• Federation
1. Pools
- Members from the pooling agreement agrees to control the deman or supply
of a product without giving up their separate entities.
2. Cartel
- Pool having a common sales agency.
• Consolidation (Partial)
1. Trusts
- An agreement binded by a trust certificate to promise a transfer of
controlling amount of stock to a board of trustee.
Forms of Business Combination

2. Holding Companies
- Organization owning a controlling amount of their share capital by
combining industrial units.
3. Community of Interests
- A group of common stockholders or directors who controls the business
policy of several companies.
• Consolidation (Complete)
1. Merger
- Two or more organizations merge and their operations are absorbed by a
new org.
Forms of Business Combination

2. Acquisition
- Refers to the process of acquiring a company at a price called acquisition
price, paid by cash, shares, or both
3. Amalgamation
- Two or more businesses consolidate their business and form a new one.
Reason for Business Combination

• Elimination of competition • Growth of joint stocks


• Solve capital problems companies
• Achieve economies • Status in market
• Effective management • Demand and supply balance
• Tariff Facilities • Transport and communication
development
• Uniform policies
• Research facilities
• Use of technology
• Economic instability
• Face cries
Advantages

• Increase in Capital • Experts Services

• Elimination of Competition • Research Work

• Saving in Expenses • Use of Modem Technology

• Controls over Production • Stability

• Large Scale Marketing • Division of Labor


Disadvantages

• Creation of Monopoly • Costly Management


• The concentration of wealth • Over Capitalization
• Reluctant to be Accepted • Misuse of Funds
• Changes in Friction
• National Interest Ignored
• No Personal Contact

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