SYNERGY

2+2=5

Also known as POSITIVE SYNERGY

According to the American Heritage Dictionary, the term "synergy" is derived from the Greek word sunergos, meaning "working together or joint work

The 2+2=5 effect means that operating independently, each subsystem can produce only 2 units of output. However, by combining their efforts and working together effectively, the two subsystems can produce 5 units of output.

It refers to the combined effects produced by two or more parts, elements, or individuals. Simply, synergy results when the whole is greater than the sum of the parts.

It is a advantage to a firm gained by having existing resources which are compatible with new products or markets that the company is developing.

If the firm is broken into smaller units performing the same function , this would lead to a reduced output or ultimately increase the costs.

For example, 2 people can move a heavy load more easily than the that 2 working individually can each move their half of the load.

The whole organization would be greater in capability than the sum of its individual parts. Individual parts may consists of people and units of the organization.

It will help the firms to work as a team to achieve their goals with increase in their output and reduction in the cost.

SALES SYNERGY

OPERATING SYNERGY

INVESTMENT SYNERGY

MANAGEMENT SYNERGY

It is used for products which is obtained through use of common marketing facilities such as distribution channels ,sales staff & administration and warehousing. Supplying a range of complementary products increase the productivity of the sales force . Shared advertising, sales promotion and corporate image generate a much higher return than average per rupee spent.

It arises from the better use of operational facilities and personnel ,bulk purchasing , a greater spread of fixed costs and the advantages of common learning where the experience gained by employees in making one product can be transferred to making new products. Example - If two small firms merge, then they can saved fixed costs by moving into the same premises/business and sharing the same office staff ,then there will be definitely savings in cost for the both firms.

It can be achieved from the joint use of plant, common raw materials stocks , transfer of Research & Development from one product to another , i.e from the wider use of of a common investments in a fixed assets or working capital or research.

It is advantage to be gained where management skills concerning current operations are easily transferred to new operations because of the similarity of same problems in the two industries.

The Walt Disney Company, benefits greatly from synergy. The companys movies, theme parks, television programs and merchandising licensing programs all benefit from one another. Its famous movie the Lion King earned over $300 million in box office revenues. In addition Disney earned hundred of millions more from the sale of licensed Lion King toys, clothing and video games.

The Lion King stage show at Disney world attracts more guests to the park an the video sold 20 million copies during the first week of its release In India.

SYNERGY is an important concept for managers as : Reinforces the need to work together in a cooperative manner. Organizational units tend to be more successful working together than working alone. SYNERGY is applied to marketing for measuring overall effectiveness through the coordinated operation of many implements

Greater the SYNERGY a firm can mange to achieve through its selection of products & markets ,the more flexible will be its competitive position .

Organizations strive to achieve positive synergy or strategic fit by combining multiple products, business lines, or markets. One way to achieve positive synergy is by acquiring related products, so that sales representatives can sell numerous products during one sales call. Rather than having two representatives make two sales calls to a potential customer, one sales representative can offer the broader mix of products.

DYSERGY

2+2=3

Also known as NEGATIVE SYNERGY

Not all SYNERGY is positive. The combined negative attitudes and argue over small things of dissatisfied group members can add upto greater trouble than any of the members could have caused individually in any organization.
Mostly sick companies suffer from this negative synergy.

NEGATIVE SYNERGY means the combination of efforts results in less output, It can result from due to following reasons :
inefficient committees business units that lack strategic fit and from other poorly functioning joint efforts.

Negative synergy occurs in groups, committees, and other joint efforts for a number of reasons. Groups commonly experience negative synergy because group decisions are often reached more slowly, and thus may be more expensive to make than individual decisions. Negative synergy can also occur in group decisions if an individual is allowed to dominate and control the group decision.

For example, a company Kimberly-Clark Corporation set out to sharpen its emphasis on consumer and health care products by divesting its tiny interests in business paper and pulp production. According to the company, the removal of the pulp mill will enhance operational flexibility and eliminate distraction on periphery units, thus allowing the corporation to concentrate on a single, core business activity.

The combination of people or business does not necessarily that it will lead to better outcomes, It can also resulting lack of harmony or coordination which can lead to negative synergy. Downsizing and the divestment/cutback of businesses is the part of negative synergy.