It Pays to get along - More on Synergy

Remember when you were young, and the teacher told you to play nice with others, continue to do this throughout your life. Wikipedia , the greatest online encyclopedia out there, has some great information on synergy. Here are Wikipedia's definitions of synergy - "Human synergy relates to interacting humans. For example, if person A alone is too short to reach an apple on a tree and person B is too short as well. Once person B sits on the shoulders of person A, they are more than tall enough to reach the apple. In this example, the product of their synergy would be one apple. Another case would be two politicians. If each is able to gather one million votes on their own, but together they were able to appeal to 2.5 million voters, their synergy would have produced 500,000 votes.
Synergy usually arises when two persons with different complementary skills cooperate. The fundamental example is cooperation of men and women in a couple. In business, cooperation of people with organizational and technical skills happens very often. In general, the most common reason why people cooperate is that it brings a synergy. On the other hand, people tend to specialize just to be able to form groups with high synergy (see also division of labor and teamwork).
Corporate synergy occurs when corporations interact congruently. A corporate synergy refers to a financial benefit that a corporation expects to realize when it merges with or acquires another corporation. This type of synergy is a nearly ubiquitous feature of a corporate acquisition and is a negotiating point between the buyer and seller that impacts the final price both parties agree to. There are two distinct types of corporate synergies:
· Revenue: a revenue synergy refers to the opportunity of a combined corporate entity to generate more revenue than its two predecessor standalone companies would be able to generate. For example, if company A sells product X through its sales force, company B sells product Y, and company A decides to buy company B then the new company could use each sales person to sell products X and Y thereby increasing the revenue that each sales person generates for the company.
· Cost: a cost synergy refers to the opportunity of a combined corporate entity to reduce or eliminate expenses associated with running a business. Cost synergies are realized by eliminating positions that are viewed as duplicitous within the merged entity. Examples include the head quarters office of one of the predecessor companies, certain executives, the human resources department, or other employees of the predecessor companies. This is related to the economic concept of Economies of Scale."

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