What Are Advantages And Disadvantages Of Business Combination?


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Sarah Devine answered
Here are lists of both the advantages and disadvantages of a business combination in the marketplace:

Advantages of a business combination

•There will be less competition between companies, meaning there may be more chance of securing increased profits. This may also offer an increased likelihood of a monopoly in the market being achieved.
•The amount of capital may be increased by entering into a business combination. This may be beneficial in establishing future plans such as entering new marketplaces or developing new products.
•The cost of managing and establishing the company may be reduced. This will also apply to operational costs that will also be reduced as there may be more scope for a larger production scale for instance.
•Buying materials for front line production or distribution can be acquired at a better price. Due to the added capital available, materials or stock can be bought in bulk, and therefore at a better price. This will also help secure a more stable price for goods in the marketplace. 

Disadvantages of a business combination

•Monopoly in the market may have a negative impact on a local community and society. This may lead to local independent stores having to close and could result in major job losses.
•This could lead to a market that is over-capitalized. There is less scope for healthy competition between businesses and less choice for the consumer in terms of goods and services.
•The identity and reputation of the old company comes to an end as it enters into a business combination. This may have an impact for the employees who may lose a sense of their identity as part of the company.
•There may be added pressures and tensions in the new management structure. It may become more difficult to manage a business combination than one singular business or organization would be to maintain.

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