Causes of Business Combination

Elimination of Competition

The main object of farming business is to avoid competition among the firms. Every business is unable to secure full control over the market due to modern technique of production marketing stiff competition among the produces and lowered the profit market.

Economy

Through the combination, the organization can benefit from large-scale production. The raw material purchased is bulk, standard goods with specialized reduce the operational cost and sell the product and maximum possible profit.

Change in the Economic Policy

If there is political instability in the country, the govt. policies are subject to frequent charges, it promotes businessmen to combine and chalk out policies which reduce risk in business.

Transportation

The development mode of transportation has also led to the growth of industrial combination. The transportation development has made it possible to build up a large business in various parts of the country. These big industrial units, being small in number, easily form industrial combination.

Rationalization

The business units may combine for standardization of products, planned utilization of resources and introduction of automation in industry.

Completing International Market

The combination of successful into prices reduces the risk involved in beginning and selling in the international market

Natural Resources

Underutilization natural resources is also a cause of business combination.

Trade Cycle

There is up and down in the business. The changing market condition makes the business unstable. The demand for the product is flexible due to trade cycle, the boom period. The business works at the highest level. There is too making an increase in the business unit. During desperation, all business works at the lowest level. The firm joint together reduces the risk of the trade cycle.

Economic Policies

The changing economic policy of the govt. Increase the risk of business frailer through a business combination. People combine different types of business so that the loss of one business can be offset against the other business.

Research Work

The small firm cannot carry out for the research knowledge. The large capital is helpful to meet research expenses. In order to benefit from the research one business, is combining with other having the research facility. It is highly valuable in case of a business combination.