What is Synergy?

Companies generally focus on the core competency of the parent company. This leads to creating value from relationship between the parent and its businesses.

In this form of corporate headquarter, the parent has a great deal of power in this relationship. If there is a good fit between the parent’s skills and resources and the needs and opportunities of the business units, the corporation is likely to create value.

In the scene above from ‘In good company’ , lead actor can be seen talking about synergy in the company, by tying up with their sister company ‘krispty Krunch’.

He says that their sports magazine can advertise in the boxes of their sister company and how both of them can benefit through this.

The primary job of corporate headquarters is, therefore to obtain synergy among the business units by providing needed resources, transferring skills and capabilities among the units and by coordinating the activities of shared unit functions to attain economies of scope.

This is an agreement with the concept of learning organization in which the role of the large firm is to facilitate the transfer of knowledge assets and services throughout the corporation.*

Sources: D.J. Collins “Corporate Strategy in a multibusiness firms”

D.J. Teece, “Strategies for managing knowledge assets”

Strategic Management and Business Policy: Thomas L. Wheelen, J.David Hunger, Krish Rangarajan

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