Subject : Introduction to Business Semester : BBA-1st By - Hijratullah Tahir

1. Business Combination
By – Hijratullah Tahir
Introduction to Business

2. Business combination
Business Combination:
– The voluntary association of firms
– For the achievement of common objectives.
Firm:
– Firm is a legal business entity or unit
– Which combines the factors of production to
produce the goods and services.
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3. Business combination …
Industry:
– The collection firms which are similar in the
nature or same line of production.
– Like,
• Automobiles industry,
• Beverages Industry,
• Pharmaceutical industry,
• Textile industry etc.
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4. Causes of business combination …
I. Elimination of competition:
– Core cause of combination is to eliminate
competition
– Create great monopoly
– Monopoly – when there is single supplier in the
market and have hold on the whole market

5. II. Economies of large scale of production:
– To produce more output
– Large scale of production has got some economies
(Benefits)
– Like Financial economies, Marketing economies and
risk bearing economies etc.
III. Changes in economic policies:
– In case, Country Taxation are very high
– Individual business may not be able to bear (Pay) it
– That’s why these individual business join together to
afford the high tax.
Causes of business combination …

6. IV. Fluctuation in the business activities:
– To overcome the fluctuation of the business by
minimizing the risk of huge losses
V. Severe competition:
– Small business cannot compete with a big business
– Because big business enjoys more economies as
compared to a small business.
– Therefore, small business has to join with the big
business in order to survive.
– “If you cannot defeat someone then join him”
Causes of business combination …

7. Types of business combination
Horizontal
Combination
1
Vertical
Combination
2
Diagonal
Combination
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8. Types of business combination …
i. Horizontal combination:
– Voluntary association of two or more than two
firms at the same production level.
– Like; Four cement companies are at the same
stages of production, the are engaged in same
activity.
ii. Vertical combination:
– involved in successive/ Sequential phase of the same line
production process. like, in cotton wearing; some
businesses are involved cotton bleaching, and some
businesses are involved cotton spinning.
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9. Types of business combination
iii. Diagonal combination:
– Industrial unit combine with related services
industry.
– Like; Automobile with Transport Company etc.
– Also called Service combination