Operational Synergies
Operational synergies are the synergistic results achieved when two or more organizations merge, share resources, joint venture, or partner to achieve a common goal. Synergies in operations, when achieved, can lead to cost savings, better utilization of resources, improved efficiency and improved customer service.
The most common type of operational synergy is cost savings, as when two organizations merge, the structural costs of running the businesses can be reduced or eliminated, resulting in reduced overhead and operating costs. Cost savings can occur when the two organizations combine their resources, such as by sharing the same facilities, pooling cash, or sharing services and expertise. Such synergies can often result in a product that is cheaper than either of the two original products, as the cost savings from combining resources is passed on to the customer.
Improved efficiency is another type of operational synergy that can be achieved. In this situation, two or more organizations merge or partner in order to achieve a greater level of productivity. One example is when two companies come together to form a larger organization with more resources to draw upon, allowing them to increase output, reduce waste, and find better and more efficient ways of working.
Besides cost savings and improved efficiency, operational synergies can lead to better customer service. Combining resources allows the two organizations to combine their efforts in marketing and customer service, resulting in better customer relations, improved customer satisfaction, and higher revenues.
The pooling of resources, whether it be in the form of finances, personnel, or production capabilities, can also lead to an increase in the marketability of the combined product, as the two organizations can leverage their combined capabilities to better compete in the marketplace.
Additionally, operational synergies can allow both organizations to reduce risks, as the pooling of resources allows them to spread the risks over both companies. This can lead to lower costs and fewer chances of losses, as the combined resources of the organizations can be used to help buffer against potential losses.
Finally, operational synergies can lead to a greater brand recognition for both organizations, as the two organizations can come together to create a stronger, more unified brand across multiple markets. This allows the two companies to build a stronger reputation, which can then be used to help make the product more attractive to consumers.
In summary, operational synergies can result in cost savings, improved efficiency, better customer service, reduced risks, and a more unified brand. When achieved, they can be hugely beneficial to the two organizations involved, allowing them to achieve new levels of success.
