In business, the term describes a hoped-for or real effect resulting from different individuals, departments, or processes or portfolios of a business or companies working together and bringing about higher productivity and revenues than those of the sum of the individual elements or processes or portfolios of the business. This kind of advantage may be derived from the combined or cooperative efforts of different lines of business of an enterprise and or from the merger of two companies in the same line of business or industry. In fact, synergy is the magic word often bandied about to justify mergers and acquisitions. We shall consider in this paper the nature, content and the extent of synergy that may be generated in both these categories of business combination. However, at the outset itself, it needs to be said as Addison's Sir Roger de Coverly had often declared years ago that "much may be said on both sides of the question". (Joseph Addison)
Currently, many of the world economies are 'knowledge-based', heavily dependent on and driven by innovative technology. Any business which cannot adapt itself to the exacting demands of such an economic environment may find it difficult to survive long in the hustle and clamour of the competitive world in which it has its existence. Today's management has to be strategically equipped for the situation. Synergy supplies that strategic equipment. And a management so equipped will focus on the whole, and not on the parts, of a conglomerate business and will work on the interface of components, on their links and binding factors, and on the potential for the whole system to achieve results that are greater than the sum of the parts. A corporation that builds on core competencies utilises skills that combine to strengthen value chains and build greater competitive advantages. This leads to synergies among business units, which help them to become more productive together than independently. The collection of skills used in this situation may be largely intangible, but corporations can and do build synergies by sharing tangible resources. Corporate strategy seeks to develop synergies by sharing and coordinating staff and other resources across business units, investing financial resources across business units, and using business units to complement other corporate business activities. In the language of simple arithmetic logic, if two horses can pull 9,000 pounds, four horses can pull 18,000 pounds. Sounds reasonable - but in the language of synergy, it is wrong! Four horses in combination will be able to pull over 30,000 pounds! It is synergy that makes the difference.
A few examples
For instance, Ford Motor Company's different brands have their own strengths and systems. The organization unites them together with shared data and compatible systems. Their different high-tech and consumer-focused businesses have imparted the potential of impressive revenue growth, and supplied the synergies for maximum benefit. Another example is that of Toyota. Its global competitive advan