Tip 7: Consider Synergy

Synergy can be useful in innovating as it could be that innovative step to work with another company that could gain competitive advantage. If a company was looking into the development of a product having other companies contribute to ideas and costs could benefit them and produce a better product that if they had done development work just themselves.

“Obtaining synergy may well imply the sharing of knowledge and other resources between divisions or business units, possibly attempting to disseminate best practice.” (John Thompson, 2010)

There are advantages to synergy but there can also be negatives to. A key advantage when synergy takes place could be the exchanging of information between the two companies which enables them get a new product to their customers faster. This could be because of shared knowledge about the process of making a new product as well as about the potentil product itself. 

How achieving synergy can be very time consuming. Spending time learning about the processes of two companies not only one. I feel working to achieve synergy is probably worthwhile if both companies can see an advantage. Another problem with syngery is that  working together may not actually work and not come out with a good product. Both companies then loose money and don't get any new customers.

Negative Synergy is often described as dysynergy or the “2+2=3” effect as the combination of two companies are not suited and do not come out with a successful outcome. 

 “when synergy is not an important consideration and hence synergy advantages of expansion over diversification are not important” (Ansoff, 2011)

Synergy is used in business all the time and companies will combine to try to get more customers. Sainsburys and Shell have now got a joint fuel and convenience store operation. This Operation has shown sucess in 100 Shell locations that are now operating with Sainsburys local stores.

"Sir Peter Davis, Chief Executive of Sainsbury's, said: "The Sainsbury's Local format is a great success -- measured by sales per square foot, 11 of the top 20 performing stores in the company are Locals, and three of these are located on Shell forecourts."  (Whitehead, 2003)


The comment above  is a very positive one about the synergy of  Shell and Sainsbury's operation. IT is a good example of how two companies can work together successfully.

References

Ansoff. (2011). In S. Karenfort, Synergy in Mergers & Acquisitions: The Role of Business Relatedness (pp. 15-24). Books on Demand.

John Thompson, F. M. (2010). In F. M. John Thompson, Strategic Management 6th edition (pp. 74-76). Thomas Rennie.

Whitehead, J. (2003, 6 2). Sainsburys's and Shell expand forecourt joint venture. Retrieved 1 11, 2012, from Brand Republic : http://www.brandrepublic.com/news/181627/