What is Business

Combination?
 Business combination is voluntary

association of firms for the achievements

of common objective.
Causes of Business Combination


 Elimination of Competition
• Some firms do not survive the competition and
finally close the business due to large number of
firms produce a particular type of commodity.
Causes of Business Combination

 Economies of Large scale production

The rival unit combine together to reap the

benefit of large scale production. They purchase
raw material in bulk, produce standard goods,
reduce the operational costs of business and sell
the product at a price which gives them maximum
profit.
Causes of Business
Combination
 Capital Problem

 Lack of Capital is great hindrance for the progress

of a firm. So, Business Combination is formed to
overcome this problem.
Causes of Business
Combination

Transportation Developments;

The development of fast means of transport has

also led to the growth of industrial combinations.
Causes of Business Combination


 Tariff facilities
• The imposition of custom and duties on the
imported goods is also an important factor in
the formation of combination.
Causes of Business Combination

 Effective Management
• Small units are unable to hire the services of
experts.
Causes of Business Combination

 Rapid changes of Economic Policy

Causes of Business Combination

 Use of Technology
• A single unit cannot use the new technology.
Causes of Business Combination

 Economic Instability
• There is fear of loss always so Business
combination is formed.
Causes of Business Combination

 Respect for bigness

• The business units of bigger size command
more respect than of smaller units.
Forms of Business Combination

 When ownership is the basis of combination, it

is known as forms of combination.

Various form of combination are grouped under

two main heads
 Simple Combination
 Compound Combination It includes
Partnership and
companies.
Forms of Business Combination

 Combined Combination is the Combination of

associations.

 1- Simple Association
• Trade Associations
• Chamber of Commerce
• Gentlemen’s Agreement
 Forms of Business Combination

 Simple Association
• Trade Association
A trade association is a voluntary association of merchants,
industrialist, traders, engaged in the same kind of trade.

Examples of these trades are;

Grain market Association, FAISALABAD
Cloth merchants Association, SHAH ALMI LAHORE
Cotton Textile mills Association, PAKISTAN
Forms of Business Combination

 Chamber of Commerce
Chamber of commerce is a voluntary association of
traders, businessmen, merchants, industrialists, financier,
who work for the benefit of business community generally
at a regional level.
Following chamber of commerce are working in Pakistan;
• Federal chamber of commerce of Pakistan.
• Federal chamber of commerce at Karachi.
Forms of Business Combination

 Gentlemen’s Agreements
The gentlemen’s agreement is the simplest and
most informal type of business combination among
competing enterprises.
 Forms of Business Combination

 Federation
• Pool
The pool is an agreement made by
members producing and dealing in similar
products. The aim of the pool is to
eliminate competition among the
producers by regulating prices.
Forms of Business Combination

 Pool
Co. A Co
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Po em
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M
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Forms of Business Combination

 Types of Pool
• Production Pool

• Market Pool

• Income or Profit Pool

Forms of Business Combination

 Cartel or Syndicate
Co
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A ny
a
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Cartel
New
Company
Co C

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mp

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y
Forms of Business Combination

 Consolidation
• Partial Consolidation
• Trust
• Community of interest
• Holding Company
• Complete consolidation
• Amalgamation
• Merger
Business combination is about to start;
Types
Types of
of Business
Business Combination
Combination
Types of Business Combination
There are four main divisions of
Business Combination.

 Horizontal Combination
 Vertical Combination
 Circular Combination
 Diagonal Combination
Types of Business Combination
 Horizontal Combination
In Horizontal combination, two or more than two
same nature business units combined
themselves under the one management. For
example, if four cement industrial units are at the
same stage of production, they are engaged in
same activity. They sell wholesale.
Types of Business Combination
 Horizontal Combination

Management
A B C D
Cement Cement Cement Cement
Factory Factory Factory Factory
Types of Business Combination
 Vertical
Cotton Ginning
Combination
Vertical integration is Cotton Spinning
the combination of
firms in successive Cotton Wearing
stage of the same
industry. Cotton Processing

Wholesale Selling
 Types of Combination
 Circular Combination

Chemical Cement
Industry Industry

Management
Of
Circular
Combination

Cloth Shoes
Industry Industry
Types of Combination
 Diagonal Combination
Diagonal combination takes place when two or
more than two business units rendering
subsidiary services unite under main industry or
under a single management a diagonal
combination is formed.

Tailoring Units Garments Industry Designing Units

Advantages & Disadvantages of
Business Combination
Advantages of Business Combination

 Increase in Capital  Reduction per unit

 Elimination of cost
Competition  Closing down
 Saving is expense inefficient firms
 Controls  Use of Modern
overproduction technology
 Large Scale  Stability
Marketing  Division of Labor
 Experts Services
Disadvantages of Business Combination

 Monopoly
 Concentration of wealth
 Increased risk
 Costly management
 Overcapitalization
 Misuse of funds
 No Personal contracts
COOPERATIVE SOCITIES
Meaning of Cooperative

• Cooperative is a special form of organization. It

differs from other major forms of organizations in
set up not to earn profit but to render services to
its members.
Characteristics of
Co-operative undertaking

• Body Corporate
• Voluntary Association
• One man one vote
• Service motive
• Distribution of profits
• Control and management
• Cash transaction only
• Religious and political neutrality
• Liability
Principal of
Cooperative
• Voluntary membership
• Equality
• Decision democratic
• Spirit of co-operation
• Welfare objective
• Honesty
• Mutual confidence
• Economy
• Payment of dividend
• Sales on cash
• Market prices of the Commodities.
 Classification of
Co-operative societies

• Types of Cooperatives
• Producer Cooperative societies;
•• It is successful when;

Business is on small scale

Need special skill of doing a work
Work is labor intensive
Management is honest and efficient
Classification of
Co-operative societies

• Types of Cooperatives
• Consumer cooperatives
• Cooperative market societies
• Cooperative credit societies
• Co-operative Insurance
• Co-operative Housing societies
• Co-operative Farming societies
• Miscellaneous societies
Advantages of
Co-operatives

• Merits of Cooperatives
•• Easy
Easy Formation
Formation
•• Open
Open membership
membership
•• Relief
Relief by
by Government
Government
•• Elimination
Elimination of Middlemen
Middlemen
•• Minimum
Minimum Inventories
Inventories
•• Distribution
Distribution ofof wealth
wealth
•• Limited
Limited Capital
Capital
•• Long
Long life
life
•• Employment
Employment
opportunities
opportunities
•• Economic
Economic development.
development.
 Disadvantage of
Co-operatives

• Difficulty in cooperation.
• Inefficient management.
• Inefficient Employees.
• Mismanagement.
• Limited liability.
• Lack of secrecy.
• Rigid Government rules and regulations,
Cooperative Societies

• A cooperative society is a form of organization wherein

persons voluntarily associate together as human
beings on basis of equality for the promotion of
economic interest of themselves.
Forming of Cooperative society
in Pakistan

• Application for Registration

• Minimum members
• A society is registered if there are at least 10 members above
the age of 18 years.
• Rights and liabilities of members
• Dues
• One man one vote
• Death
Forming of Cooperative society
in Pakistan

• Property and Funds of a registered society

• Loan
• Rules and regulations
• Investments
• Net profit
L i p to n
Break`