Does "Synergy" Really Exist?

For those of you scratching your heads-“synergy” was a much-abused bussword of the 1990’s-it basically means that two business groups which merge, can be MORE effective than they would be separated. This is the idea that drove a whole raft of business mergers-but most of them seems not to have worked. I ask this question, because I used to work for a large european multinational. When I joined this firm, it literally made EVERYTHING, in the way of electronics: a partial list included-TV, radios, computers, electronic components, displays, power supplies, test equipments, assembly equipments, etc. You could literally do “one-stop” shopping with us, and get just about everything you needed.
Now, some 15 years later, the company has virtually dismembered itself-at least half of the divisions were either sold off or closed. clearly, the company was not efficient. So I ask the question are big multinationals any better than smaller firms? I think not!

I consulted briefly for a company called Synerlogic. They were bought out by Anderson Consulting. Not long after I left, they (Synerlogic) folded. I guess they just couldn’t synergize with Anderson (… but who could blame them!)

I recently worked as an independent on a project staffed by Anderson Consulting. Not long into the project, Anderson Consulting announced that they would be no more as of Jan 1 2001. I guess they could no longer synergize with Arthur Anderson. Go figure.

What? You’re doubting a buzzword concept? How dare you! You need to be more proactive in leveraging your capital to facilitate a new paradigm. :slight_smile:

I think synergy can exist in many types of situations, but bigger does not necessarily equal better. It’s sometimes difficult to tell ahead of time when you’re looking a large multinational firm whether they will work together well. It seems to be working well for DaimlerChrysler.

Essentially, synergy exists anytime two people cooperate to achieve something they otherwise couldn’t do. You could say that most businesses have synergy at some level.

Well, in your OP you asked if Synergy really exsisted. The answer to that is yes. It doesn’t always work in the biz. world, but it’s in nature and other things. For example: the way ducks fly in a V is an example of synergy as well as cyclists in a pace line (my personal favorite example). We see synergy in music too. Each instrument works together to produce overtones, and sounds that no instrument could produce alone. Got it?

Sure, it exists.

Unfortunately, it was used to justify a lot of mergers that had nothing to do with synergy. Merging two competing companies with similar products is probably more about market share and cost reduction.

But for a real-life business example where synergy was involved: An Internet Service Provider is bought up by a telecommunications company. The ISP generates lots of phone traffic for the telco, the telco can provide cheap backbone infrastructure, both parties together can make an extremely competitive product, both win. If they hadn’t merged, they’d been fighting each other over the profit share from each customer, now they can split the cake any way they want - and even get a bigger cake in the deal.

S. Norman

Of course it exists. Synergy Field, it’s where the Cincinatti Reds play!

I agree that it exists, and, has been used to justify a lot of mergers that don’t make sense.

In any industry, some “scopes” and “scales” are more efficient than others. For example, when manufacturing items that have huge initial costs and lower marginal costs, it is more efficient to have a big company cranking these things out. Thus we see a lot of really really big car companies.

If two companies merge to form a company with a more efficient scale or scope, then there is arguably some “synergy” there.

As another poster suggested, “synergy” is often used as an excuse by management for “empire building.”

The Beatles - four-way synergy.