GROUP NO: 3

Advantage and disadvantages of business combination.

Business combinations can offer several advantages, including;
 
1. Economies of scale; Combining two or more companies can result in economies of
scale, which can lead to cost savings and improved profitability. By pooling
resources and sharing costs, the combined entity may be able to achieve greater
efficiency and lower per-unit costs 
2. Increased market power; A business combination can increase market power by
creating a larger, more dominant entity in the marketplace. This can lead to increased
pricing power and the ability to negotiate better terms with suppliers
3. Diversification; Combining two or more companies can result in greater
diversification of products, services, and markets. This can help reduce the risk of
relying too heavily on a single product or market 
4. Access to new markets; A business combination can provide access to new
markets, customers, and distribution channels. This can help the combined entity
expand its reach and grow its customer base
5. Sharing of expertise and resources; Business combinations can facilitate the
sharing of expertise, resources, and technology between companies. This can lead to
improved innovation, product development, and operational efficiencies.
6. Improved financial performance; Business combinations can result in improved
financial performance through increased revenue, cost savings, and improved
profitability. This can benefit shareholders, employees, and other stakeholders
 The following are the Disadvantages of business combination;
Complexities in management; Business combination results into large firms
with alot of things to deal with because of expansion, therefore issues of management
becomes difficult to those firms, for example it is difficult to control employees in a
combined firms due to lack of contact to employees as compared to small firms
where there are direct contacts between employees and those who control them.
Threats to small firms; Business combination result into large firms and those
firms have large capital, therefore through this it makes difficult conditions for small
firms of the same nature to compete with combined firms and to survive into the
market hence combined firms are so powerful to dominate the market.
 Risk of over - capitalization; Through business combination results into
increase of capital or huge capital, therefore this give the room for wastage of
resources of the firm and also drop of the rate of the profit of the firm for example
increase the cost of production.
Loss of employment; Business combination results into combination of
different kinds of works, this may lead to some workers to lose their jobs since the
company cannot work with many people performing the same kind of tasks.
Bad effects of monopoly; The issue of business combination creates the
monopoly firms, therefore they tend to control the market and introduce things that
have negative effects to the people or consumers, for instance they tend to increase
the prices of goods in the market and even doing so people cannot do anything
because those firms control the market.
 Exploitation of labour ; Combined firms make some people to lose their jobs and
that are being employed in those firms may be exploited especially being paid low
salaries and they cannot blame or do nothing for the fear of losing their jobs that may
be needed by other people with no jobs.