What is synergy? According to Goold and Campbell, what are the six forms it can take?
What will be an ideal response?
Synergy is said to exist for a divisional corporation if the return on investment of each division is greater than what the return would be if each division were an independent business. Synergy can take place in one of six forms according to Goold and Campbell:
Shared know how: combined units often benefit from sharing knowledge or skills.
Coordinated strategies: aligning the business strategies of two or more business units may provide a corporation significant advantage by reducing inter-unit competition and developing a coordinated response to common competitors.
Shared tangible resources: combined units can sometimes save money by sharing resources.
Economies of scale or scope: coordinating the flow of products or services of one unit with that of another unit can reduce inventory, increase capacity utilization, and improve market access.
Pooled negotiating power: combined units can combine their purchasing to gain bargaining power over common suppliers to reduce costs and improve quality.
New business creation: exchanging knowledge and skills can facilitate new products or services by extracting discrete activities from various units and combining them in a new unit or by establishing joint ventures among internal business units.