The synergy effect that they derive is that they get to handle the problems that face them no matter how hard they may seem to be
. It is advantageous for a firm to collude when they experience problems that can easily be solved in case they joined their individual forces. There are different types of synergies that the firms can engage in depending on how bad they are hit.
To begin with, firms may come together with the idea of making better their marketing strategies. This is normally experienced when the firms get poor sales due to poor marketing techniques that they are using. This is called the marketing synergy and usually targets on improving the methods that are used to promote the products that they deal with. The synergy effect of this is that the consumers will get to know more about the product in question and begin to use it. Within no time the product would be a household name meaning that they would be experiencing great sales.
Secondly, individual firms may be experiencing losses due to the poor management body that they have. Therefore, they may opt to seek for collusion as their best deal which will free them from the burden. Firms colluding will look for the best personnel to be able to improve on the decision making process as this affects the returns. This is called the management synergy and the synergy effect that is obtained is the fact that there would be a new body that would make effective decisions that profit the firms.
Hey! Do you know that expenses can make a firm to close and go home? This is 101% true. Why? Because the business would be moving 5 steps ahead and 10 steps backwards. The overall result is negative returns. There is no firm that can operate with expenses in every corner. This is why they have to employ the expense synergy. Synergy effect would be the overall reduction in the expense burned that the firms have to incur. It is a good way to help out a falling company back to operation.
Additionally, taxes have become quite unavoidable with the numerous laws that are formulated each day. An easier way of making sure that your firm does not end up being bankrupt is by combining forces with the synergetic effect being to reduce the burden of paying such taxes. This type of synergy is referred to as the tax synergy. Most firms would go for this to evade the burden of taxes.
There are times that forming a firm may prove to be a hard nut to crack. This would call for the combination of forces to come up with solutions that would see the firms in operation. This includes raising capital that the form can use to operate. The synergy effect would be the fact that the firms would spend less in coming up with the initial capital to get the business in operation.