Sunday, 19 June 2011

Demerits or Disadvantages of Combination or Business combination

Disadvantages of Business Combination :-
Following are important disadvantages of combination :

1. Creation of Monopoly :-
It creates monopoly which is harmful for the public.

2. Concentration of Wealth :-
It concentrates the wealth in few hands and divides the society into two classes rich and poor.

3. Not Acceptable :-
Combination is disliked by the people, it is not acceptable.

4. Changes of Friction :-
The chances of friction among directors and officers are bright. They quarrel with each other for their own interest.

5. No Personal Contact :-
It is not possible to maintain direct contact between employees, creditors and shareholders. Due to this business may suffer a loss.

6. Costly Management :-
A combination hires costly management, which increases the cost of production.

7. Over Capitalization :-
There is always a danger of over capitalization in the combination. It is harmful for the combination.

8. Misuse of Funds :-
The directors of the company enjoy unlimited power and misuse the capital.

9. National Interest Ignored :-
Generally the combinations ignore the national interest and they involved in such activities which are against the national interest.


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