Let’s Discuss Merits and Demerits of Business Combinations
“Big Businesses take resort to this form of business so they can achieve the goal of low costs in various business operations like sales, purchase, etc. ”
Business combinations are usually carried out by large businesses. They take resort to this form of business so they can achieve the goal of low costs in various business operations like sales, purchase, etc.
Large businesses can make use of experts that help to improve quality and boost manufacturing. The use of odds and ends can be made for the manufacture of by-products and all kinds of wastages can also be avoided. The advantages of domination can be achieved effortlessly by balancing demand and supply in the market.
Another benefit possessed by a monopoly concern relates to lessening of the advertising cost. Big business combinations try to achieve price stability and hence help to withstand trade cycle. Economies of extensive production are helpful in reducing costs of commodities.
Business combinations usually lead to concentration of riches as well as political power in the hands of a small number of persons. Political dishonesty is the direct result of business combinations. The very base of these combinations is the removal of competition.
Combinations support incompetence by providing shelter to ineffective firms against competition. Large organizations tend to become cumbersome and uncontrollable.
There is always the danger of over capitalization under lasting domination, which is not wanted from the standpoint of shareholders, nation and the business unit itself. A monopolist has more bargaining authority, which proves damaging to poor and unorganized producers of crucial goods or unrefined materials.
The monopolies may also act as a hindrance to sustained economic progress. They are not bothered about new ideas and means of production. They may go to the extreme and indulge in the playing of every unclean method to stop the entry of opponents in the market. Combinations also entail great risks. Owners, leaders and the country as a whole have to suffer if a massive combination caves in.
Moreover, the peril of collapse increases because the government and the public do not repose faith in them. Combinations may also take undue advantage of labour under the excuse of rationalization and scientific management. Such combinations often put a check on the entry of fresh businesses in the market and also may become a strong basis of adverse Capitalism.
Author - DeeKay
Tags - Finance, Economy
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