Benefits of consolidating services
By closing one plant, the company decreases its labor and overhead costs as well as its capital expenditures. With the right amount of capital to spend towards common goals, both old companies can benefit from expansion.
When a company buys another company, it might become sufficiently large to serve customers on a national or international basis. This type of organizational consolidation increases the size of a company's market, which in turn can lead to higher sales and profits.
For example, consolidating the recruitment and hiring process within the headquarters of a firm with multiple locations will ultimately lead to greater inefficiency and cost. By reducing the number of facilities in a business, it can save money and operate more efficiently. Lowering Overhead Expenses Consolidation can reduce real estate and some other overhead costs.
This in turn gives the merged company more negotiating power to get better deals with suppliers. Nordmeyer holds a Bachelor of Science in accounting, a Master of Arts in international management and a Master of Business Administration in finance. The complexity of systems integration has increased and forced more investments in ongoing maintenance.
When a company buys out a rival company, it reduces its number of competitors. Her favorite audiences to write for are small-business owners and job searchers. Those resources no longer needed under a new scheme are sold, closed or disposed of in a cost-effective manner.
Closing down one hospital and moving resources over to the other hospital might be the solution, or one hospital might be converted to an outpatient center. It also allows for reallocation and reinvestment of assets. An increase in market size also provides an opportunity to expand a company's business line, which can lead to increased sales and profits as well. The savings are reallocated to new initiatives or to remaining programs needing more money.
Centralized control and management of systems, greater access to information, and increased availability of cross agency information results in more effective decision making. With greater size, the business can establish a regional or national brand and gain greater purchasing power. For example, a jet engine manufacturer might close one under-utilized manufacturing plant and install additional production lines at another plant.
This type of capital building enables the newly formed organization to pursue more costly new initiatives. As a result, operating and capital costs decline, which helps improve the bottom line. In consolidation, existing positions may be cut, but a new structure provides jobs for the most qualified people.
Economies of scale may also apply if departments can share supplies, equipment, and support personnel. For example, if one company merges with another, the new company has the capital and assets of both companies. More Effective Organizational Structure Another benefit of consolidation is creating a more responsive workforce that is less costly to the new organization. During the consolidation process, business functions are frequently re-engineered and systems are deployed that make these functions even more efficient. Consolidating or sharing redundant systems and processes results in efficient and effective use of all resources, allowing for reinvestment of funds.
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