Business combination

Business combination :-

In a free market economy the government maintains the law and order in the country. The people are free to do the business in the manner they like under the law of the land. The ever increasing numbers of units start competition. The growing competition leads to unfair business practice for the survival of business units. The life of many business units becomes doubtful. The business combination is a way to solve business difficulties. In every productive sector a combination can be seen in various degrees and forms. The combination may be for a short period of time or on permanent basis. Business combination is an association of many independent businesses. The combining units are controllable by a common management. The expert and talented management is able to increase profits by eliminating competition, reducing cost due to large scale economies and control over the market. There is control over supply which is necessary for raising the prices to a reasonable level. In this way the weak businesses can work in the market. The nature of work and ownership are the basis of combination. Due to nature of work combination may be horizontal, vertical, circular, lateral and services. On ownership basis the business combination has three forms simple association federation and consolidation. In simple association there are trade association chamber of commerce and informal agreement. The federation includes pool cartel and informal agreement. The consolidation consists of trust, holding company, and community of interest, amalgamation and merger. The giant business units prefer combination.