What is Business Combination?

is voluntary  Business combination
association of firms for the achievements of common objective.

Causes of Business Combination

 

Elimination of Competition

• Some firms do not survive the competition and

finally close the business due to large number of firms produce a particular type of commodity.

Causes of Business Combination

Economies of Large scale production
The rival unit combine together to reap the benefit of large scale production. They purchase raw material in bulk, produce standard goods, reduce the operational costs of business and sell the product at a price which gives them maximum profit.

Causes of Business Combination  Capital Problem

Lack of Capital is great hindrance for the progress of a firm. So, Business Combination is formed to overcome this problem.

Causes of Business Combination  

Transportation Developments;

The development of fast means of transport has also led to the growth of industrial combinations.

Causes of Business Combination

 

Tariff facilities

• The imposition of custom and duties on the

imported goods is also an important factor in the formation of combination.

Causes of Business Combination

Effective Management

• Small units are unable to hire the services of

Causes of Business Combination

Rapid changes of Economic Policy

Causes of Business Combination
Use of Technology

• A single unit cannot use the new technology.

Causes of Business Combination
Economic Instability

• There is fear of loss always so Business
combination is formed.

Causes of Business Combination
Respect for bigness

• The business units of bigger size command
more respect than of smaller units.

Forms of Business Combination

When ownership is the basis of combination, it is known as forms of combination. Various form of combination are grouped under two main heads Simple Combination It includes Compound Combination Partnership and companies.

 

Forms of Business Combination

Combined Combination is the Combination of associations. 1- Simple Association

• Trade Associations • Chamber of Commerce • Gentlemen’s Agreement

Forms of Business Combination

Simple Association

Trade Association

A trade association is a voluntary association of merchants, industrialist, traders, engaged in the same kind of trade. Examples of these trades are; Grain market Association, FAISALABAD Cloth merchants Association, SHAH ALMI LAHORE Cotton Textile mills Association, PAKISTAN

Forms of Business Combination
Chamber of Commerce
Chamber of commerce is a voluntary association of traders, businessmen, merchants, industrialists, financier, who work for the benefit of business community generally at a regional level. Following chamber of commerce are working in Pakistan;
• •

Federal chamber of commerce of Pakistan. Federal chamber of commerce at Karachi.

Forms of Business Combination

Gentlemen’s Agreements
The gentlemen’s agreement is the simplest and most informal type of business combination among competing enterprises.

Forms of Business Combination


The pool is an agreement made by members producing and dealing in similar products. The aim of the pool is to eliminate competition among the producers by regulating prices.

Forms of Business Combination



Co. A
g lin er oo mb P e M
g in ol ber Po em M

Co .


Co. G


Co. C

. Co

Co .F


Co. E

Forms of Business Combination
Types of Pool

• Production Pool

• Market Pool

• Income or Profit Pool

Forms of Business Combination

Cartel or Syndicate
Co mp a D ny
Co m pa A ny

Cartel New Company
Co mp a B ny
an mp Co C y

Forms of Business Combination

• Partial Consolidation
• • •

Trust Community of interest Holding Company Amalgamation Merger

• Complete consolidation
• •

Business combination is about to start;

Types of Business Combination Types of Business Combination

Types of Business Combination
There are four main divisions of Business Combination.
 Horizontal

Combination  Vertical Combination  Circular Combination  Diagonal Combination

Types of Business Combination
 Horizontal


In Horizontal combination, two or more than two same nature business units combined themselves under the one management. For example, if four cement industrial units are at the same stage of production, they are engaged in same activity. They sell wholesale.

Types of Business Combination
 Horizontal

Combination Management B C Cement Cement Factory Factory

A Cement Factory

D Cement Factory

Types of Business Combination
 Vertical

Vertical integration is the combination of firms in successive stage of the same industry.

Cotton Ginning Cotton Spinning Cotton Wearing Cotton Processing Wholesale Selling

Types of Combination
 Circular

Chemical Industry Management Of Circular Combination Cloth Industry Shoes Industry Cement Industry

Types of Combination
 Diagonal


Diagonal combination takes place when two or more than two business units rendering subsidiary services unite under main industry or under a single management a diagonal combination is formed. Tailoring Units Garments Industry Designing Units

Advantages & Disadvantages of Business Combination

Advantages of Business Combination
     

Increase in Capital Elimination of Competition Saving is expense Controls overproduction Large Scale Marketing Experts Services

    

Reduction per unit cost Closing down inefficient firms Use of Modern technology Stability Division of Labor

Disadvantages of Business Combination
 Monopoly  Concentration  Increased

of wealth

risk  Costly management  Overcapitalization  Misuse of funds  No Personal contracts


Meaning of Cooperative

• Cooperative is a special form of organization. It differs from other major forms of organizations in set up not to earn profit but to render services to its members.

Characteristics of Co-operative undertaking
• • • • • • • • • Body Corporate Voluntary Association One man one vote Service motive Distribution of profits Control and management Cash transaction only Religious and political neutrality Liability

Principal of Cooperative
• • • • • • • • • • • Voluntary membership Equality Decision democratic Spirit of co-operation Welfare objective Honesty Mutual confidence Economy Payment of dividend Sales on cash Market prices of the Commodities.

Classification of Co-operative societies

• Types of Cooperatives • Producer Cooperative societies; • It is successful when; • Business is on small scale Need special skill of doing a work Work is labor intensive Management is honest and efficient

Classification of Co-operative societies

• Types of Cooperatives
• • • • • • • Consumer cooperatives Cooperative market societies Cooperative credit societies Co-operative Insurance Co-operative Housing societies Co-operative Farming societies Miscellaneous societies

Advantages of Co-operatives • Merits of Cooperatives
• • • • • • • • • • • • • • • • • • Easy Formation Easy Formation Open membership Open membership Relief by Government Relief by Government Elimination of Middlemen Elimination Middlemen Minimum Inventories Minimum Inventories Distribution of wealth Distribution of wealth Limited Capital Limited Capital Long life Long life Employment Employment opportunities opportunities • Economic development. • Economic development.

Disadvantage of Co-operatives

• • • • • • •

Difficulty in cooperation. Inefficient management. Inefficient Employees. Mismanagement. Limited liability. Lack of secrecy. Rigid Government rules and regulations,

Cooperative Societies

• A cooperative society is a form of organization wherein persons voluntarily associate together as human beings on basis of equality for the promotion of economic interest of themselves.

Forming of Cooperative society in Pakistan

• Application for Registration
• Minimum members

A society is registered if there are at least 10 members above the age of 18 years.

• Rights and liabilities of members
• Dues • One man one vote • Death

Forming of Cooperative society in Pakistan

• Property and Funds of a registered society
• • • • Loan Rules and regulations Investments Net profit

L i p to n Break`

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