sharifstrategy-blog - Tumblr blog

[sharifstrategy-blog]

SOURCES OF SYNERGY

A final strategic concern at the corporate level is to increase synergy across the firm’s various businesses and product-markets. As mentioned, synergy exists when two or more businesses or product-markets and their resources and competencies complement and reinforce one another so that the total performance of the related businesses is greater than it would be otherwise.

Knowledge-Based Synergies

Some potential synergies at the corporate level are knowledge-based. The performance of one business can be enhanced by the transfer of competencies, knowledge, or customerrelated intangibles—such as brand-name recognition and reputation—from other units within the firm. For instance, the technical knowledge concerning image processing and the quality reputation that Canon developed in the camera business helped ease the firm’s entry into the office copier business. In part, such knowledge-based synergies are a function of the corporation’s scope and mission—or how its managers answer the question: What businesses should we be in? When a firm’s portfolio of businesses and product-markets reflects a common mission based on well-defined customer needs, market segments, or technologies, the company is more likely to develop core competencies, customer knowledge, and strong brand franchises that can be shared across businesses. However, the firm’s organizational structure and allocation of resources also may enhance knowledge-based synergy. A centralized corporate R&D department, for example, is often more efficient and effective at discovering new technologies with potential applications across multiple businesses than if each business unit bore the burden of funding its own R&D efforts. Similarly, some argue that strong corporate-level coordination and support are necessary to maximize the strength of a firm’s brand franchise and to glean full benefit from accumulated market knowledge, when the firm is competing in global markets.

for further information refer to https://sharifstrategy.org/