Complementary skills

As it has been mentioned previously, the companies setting the basis for mergers and acquisitions to benefit from strategic synergies operate in the same industry, address the same types of consumers and manufacture similar and competitive products which satisfy the same needs. But what makes their union result in success is the joining of their complementary skills, all to result in a superior quality of the manufactured products, a better and more extensive customer satisfaction and ultimately, increased profits. The complementary skills represent those capabilities that are held by one company or the other, but which could be joined or transferred to offer a better result. To best understand the dynamics of strategic synergies and complementary skills, take the hypothetical example of two French companies manufacturing cosmetics products. Say for instance that the first company produces high quality and reputable products, but they have been severely criticized for their increased levels of pollution and increased waste. The quality of the products manufactured by the second company is reduced in comparison to that of the first, but they have often been praised for their massive investments in newer, better and more efficient technologies which pollute less, eliminate reduced waste and are more environment friendly. Were the two companies to form a joint venture, they could easily combine their skills to produce high quality cosmetics through an environment friendly process.

Core competencies

Another aspect of strategic synergies is given by the possibility to spread and share...

To understand how this mechanism works, take the example of two companies activating in the automobile industry. Say two American manufacturers decide to go into a joint venture mostly to benefit from shared complementary skills and support each other in reaching the ultimate goals. Aside from combining the already existent resources, possibilities and data, the two will also share the future earnings and benefits. The core competencies are similar to the complementary skills, but different in the meaning that both partners have them, but at varying degrees. For instance, both manufacturers have a highly skilled marketing department that allows them to constantly communicate with the customers in order to identify needs and demands and retrieve feedback. But if the first company possesses better trained marketing specialists with access to more resources, the new business will most likely use this team.
All in all, strategic synergies are more and more commonly used by companies who desire to increase profits and consolidate their positions. Three main effects of strategic synergies can take the form of economies of scale, sharing of complementary skills and the dissemination of core competencies.

References

Iversen, M., 1997, Concepts of Synergy - Towards a Clarification, Danish Research Center Unit for Industrial Dynamics, Retrieved at http://www.druid.dk/uploads/tx_picturedb/dw1997-311.pdfon May 6, 2008

Strategic Synergy as an Engine for Growth, USS, Retrieved at http://www.ussnet.co.jp/ir/pdf/annual_03/4732_04.pdfon May 6, 2008