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Monday, 20 June 2011

Discuss the various Types or Kinds of Business combination


Types of Business Combination :-
It has following four types :

1. Vertical Combination.
2. Horizontal Combination.
3. Circular Combination.
4. Diagonal Combination.

1. Vertical Business Combination :-
When various departments large industrial units combine together under single management is called vertical combination. Under this combination from purchasing of raw material to selling of product all the stages are linked up by the units.For examp0le, all the business units engaged in publishing books can make vertical combination as under :


Objectives or Advantages of Vertical Business Combination :-
1. To minimize the cost per unit.
2. To eliminate competition.
3. To hire the services of experts.
4. To supply the goods at lowest price.
5. To avoid over production.
6. To use improved methods of production.
7. To achieve the benefits of large scale.
8. To find proper market for their product.
9. To supervise the management.
10. To reduce the middleman commission.
11. To earn maximum profit.

2. Horizontal Business Combination :-
It is also voluntary association which two or more than two similar nature business units combined them selves under the one management, it is called horizontal combination. For example, if four tea industrial units are at the same stage of production. The are engaged in same activity. They sell wholesale. They sell the product in the same market. Their combination will be called horizontal combination.


Objectives or Advantages of Horizontal Business Combination :-
1. To minimize the Cost per unit.
2. To eliminate competition.
3. To hire the services of experts.
4. To supply the goods at lowest price.
5. To avoid over production.
6. To use improved methods of production.
7. To achieve the benefits of large scale.
8. To find proper market for their product.
9. To supervise the management.
10. To reduce the middleman commission.
11. To earn maximum profit.


3. Circular or Mixed Business Combination :-
When different types of business units combine themselves under the one management it is called circular combination.

Example :- If a cloth industry combining with shoes industry and sugar industry is an example of mixed combination.
Objects :- The main object of mixed combination is to secure the benefits of administrative ability through common management.


4. Diagonal Business Combination :-
When two or more than two business units performs subsidiary services, if they combine themselves under the main industry it is called diagonal combination.

Example :- If designing and tailoring business units are combined with the garments industry it is called diagonal combination.


Objects :- The main object and advantage f this combination is that it makes the business unit very large and self sufficient.

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