What Is The Purpose Of Organizational Consolidation?


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The main examples of organizational consolidation are to either consolidate two or more companies together or to consolidate several departments of a company into one.

When combining departments, this is normally done to save money and make budgets easier to manage. Any savings that are made can then be pumped back into the business, enabling higher profit margins. The merging of two or more departments into one can also be an effective way of a business analyzing their more successful elements. This can then lead to streamlining certain parts of the business that are not as profitable as others.

If a number of companies are joining together as a matter of choice, this is usually for the same reasons. The larger of the companies is normally the company that will be at the head of the consolidation, and this is achieved by analyzing the individual businesses and their strong points, as well as their weaknesses. The strong points can be built upon, and the weaknesses can be flushed out, again leaving a more streamlined overall business. 

At times, companies will look to buy out other companies, which is not always welcome. This is known as a 'hostile takeover' and is not always a successful venture to take up. 

The other main purpose of consolidating organization is to improve the delivery of services to the customers. This is normally the case when customers are not happy with the services that are being provided and customer feedback indicates that profit margins may fall unless services and products improve. The streamlining of the business enables the company to focus on the products and services that are the most successful.

Consolidating two or more companies can increase the amount of fixed assets in the company, and this will enable the business to produce and sell more goods as a result.

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