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THE CONCEPT OF SYNERGY

An important aspect of corporate strategy and the growth and development of organisations is the concept of synergy which was developed in management applications by Ansoff. Synergy results when the whole is greater than the sum of its component parts. It can be expressed, simply as 2 + 2+5 Synergy is usually experienced in situations of expansion or where one organisation merges with another, such as an organisation responsible for the development and production of a product merging with an organisation which markets the product. The new organisation could benefit from the combined strengths and opportunities, skills and expertise, and from the streamlining and economy of its operations. Another example could be the merger of a computer firm expert in the design and marketing of hardware, with a firm expert in software manufacture and systems design.

It is possible, however, to experience negative synergy or the 2 + 2 = 3 situation. Such a situation might arise when a merger occurs between organisations operating in different fields, with different markets or with different methods, or where the new organisation becomes unwieldy or loses its cost-effectiveness.

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