Types of business combination
What Are The Types Of Combination In Business?
When the business men combine their business units on the basis of nature of work, it is called type of combination. Following are the main types of combination
Where the different business units of similar nature, producing similar products join together under some single management, it is called horizontal combination. Horizontal combination is the voluntarily association of two or mare than two business units, producing similar products, having same level of production and serving same geographical market.
• Two or more than two cement factories may combine together to achieve some common objective.
• If two or more than two sugar firms, which are at the same level of production, serving the same geographical market join together to form a combination it is an example of horizontal combination.
The business units engaged in successive stage of production or sales can combine their business, it means one product is made at different stages of production by different firms such combination is called vertical, sequence, process of industry combination.
The diagonal or service combination takes place when a main business combines with different firms, which supply helping goods or services for making the final products. Circular combination is also called a mixed combination. It is a merger of firms producing altogether entirely different products under the banner of central agency.
Where the different business units of similar nature, producing similar products join together under some single management, it is called horizontal combination. Horizontal combination is the voluntarily association of two or mare than two business units, producing similar products, having same level of production and serving same geographical market.
• Two or more than two cement factories may combine together to achieve some common objective.
• If two or more than two sugar firms, which are at the same level of production, serving the same geographical market join together to form a combination it is an example of horizontal combination.
The business units engaged in successive stage of production or sales can combine their business, it means one product is made at different stages of production by different firms such combination is called vertical, sequence, process of industry combination.
The diagonal or service combination takes place when a main business combines with different firms, which supply helping goods or services for making the final products. Circular combination is also called a mixed combination. It is a merger of firms producing altogether entirely different products under the banner of central agency.
If ownership is basis for combination it is called form of combinations. Following are various forms of combinations.
Trade Association:
It is voluntary association of traders, merchants and industrialists, who belongs to particular trade and industry.
Chamber of Commerce:
It is association of merchants, trade businessmen and financers, industrialists who work for the benefits of the commercial community of a particular district or city.
Association of Firms:
Association of firms is dealing in same line to regulate demand and supply of product. The entity of firm remains separate.
Cartels:
It is association of producers of same industry. They want to create monopoly.
Trust:
In this form of business combination, the shareholders transfer controlling share to the board of trustees and get trust certificates.
Rings:
Members in a ring fix a quota for production and cannot produce more than quota.
Holding and Subsidiary Company:
This form is used for owning and controlling of business. In this form, one company holds the securities of other company. It is called a holding company. The company whose shares are held is called subsidiary company. Generally both companies are engaged in similar nature of business.
Merger:
When Joint Stock Company take over complete owner ship of one or more than on business units, it is called merger.
Trade Association:
It is voluntary association of traders, merchants and industrialists, who belongs to particular trade and industry.
Chamber of Commerce:
It is association of merchants, trade businessmen and financers, industrialists who work for the benefits of the commercial community of a particular district or city.
Association of Firms:
Association of firms is dealing in same line to regulate demand and supply of product. The entity of firm remains separate.
Cartels:
It is association of producers of same industry. They want to create monopoly.
Trust:
In this form of business combination, the shareholders transfer controlling share to the board of trustees and get trust certificates.
Rings:
Members in a ring fix a quota for production and cannot produce more than quota.
Holding and Subsidiary Company:
This form is used for owning and controlling of business. In this form, one company holds the securities of other company. It is called a holding company. The company whose shares are held is called subsidiary company. Generally both companies are engaged in similar nature of business.
Merger:
When Joint Stock Company take over complete owner ship of one or more than on business units, it is called merger.