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What is the theory of synergy?

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Synergy is the interaction of a group of people in which the participants are able to produce more as a group than the sum of what they would produce individually, says Reference for Business. For example, two people can carry a heavy load more easily by working together than if they each tried to carry half of the load individually. Synergy arises when an organization achieves efficiency through collaboration.

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Achieving synergy within an organization can happen both organically and intentionally, according to this theory. Units within a business typically have specialized tasks such as sales or production. When a unit focuses on a particular area of the business, it can become more efficient at its speciality. So for example, a sales department and production department working together can produce and sell more goods than if both departments attempted to produce and sell their own goods. This is a natural quality of organizations and often improves over time.

Sometimes businesses actively seek out ways to improve synergy such as merging with another business. For example, in 2004 AT&T and Cingular merged in order to create more customer benefits and growth prospects than either business would have been able to achieve alone. As another example, a company with multiple lines of business may choose to spin off one or more of them in order to allow the organization to focus more thoroughly on and create more synergy within its core line of business.

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