What Are The Causes Of Combination In Business?

In the earlier stage of business firms there was no strong competition among the business units due to small scale and direct content between the producer and consumer. Now a day there is stiff competition among the business units due to expansion in the market. The stiff competition among the business units has increased the capital risk and lowered the profits of the firms. Some businesses units do not survives the competition and finally close the business. Hence the excessive competition became a very powerful cause of business combination.

Elimination of competition means creating monopoly in the market. Hence business units combine together in order to enjoy the benefits of monopoly, like high profits. Ups and downs occur at regular intervals in the capitalistic economy. It consists of booms and depressions. It leads towards the combination of many business units. In the period of boom business units combine with each other in order to enjoy maximum benefits, because each economic indicator is going in positive direction, while during the tenor of depression business units combined with each other for their survival, because each economic indicator is going in negative direction.

The business units of bigger size command more respect than of smaller units. Therefore the business units aspire to combine to have respect for the business.

Business combinations:
If we look at the basic inclination of the capitalist economy it is towards the development of mass production, growth of specialization, use of machinery and computers. There is also stiff competition among producers for the marketing of products resulting in lowering of the prices. The competition among the producers has given place to business combinations.
Business combination is basically the voluntary association of firms for the achievement of common goals. The combination among the firms may be temporary or permanent. The combination may be formed by a written agreement among the firms, or there may be oral understanding among them to unite for enjoying the advantages of monopoly. Causes of business combinations can be many.

Elimination of competition:
Nowadays, a large number of firms produce a particular type of commodity. The competition among the firms leads to goods being sold at out throat prices. The stiff competition among the producers has increased the capital risk and lowered the profits of the firms.
Some of the other causes associated with the business combination are as follows:
Economies of large scale productions
Changes in economic policy
Fluctuations in business activity
Influence of tariffs
Formation of joint stock companies
Transport developments
Patent laws
Rationalization
Respect for bigger units

LARGE CAPITAL
with the processes of business combination the business units collected large capital