Syndicate

The syndicate is a type of oligopoly agreement which is used to facilitate the entry on international markets.

This agreement is a durable, includes companies of similar size, operating in the same industry and having a similar level of development.

Features

The syndicate is a kind of higher level cartel agreement. Legal agreement govern relations between companies, so economically and legally they remain independent. Unlike the cartel, companies in some aspects decide on common interests. Achieved profits and revenue shall be then divided.

While retaining their legal separation and production companies belonging to the syndicate forgo most of the right to independently the sale of the products. It creates a common sales office, which sells the products produced by companies in syndicate, fixes uniform prices and conditions of sale. Often syndicate sales office is operated by separate company to which customer is addressing orders for products manufactured by the enterprises in the syndicate.

Sales office in turn distributes orders for individual companies. The supply of the products is made directly from the specific producer, but payment is directed via sales offices. Syndicates are created in material sectors of industry due to the easier introduction the standardization of products.

The syndicate, as well as the cartel, is non-persistent form of monopolization, its members can legally withdraw from the contract.

Syndicate is a form of economic organization bringing together companies with separate legal personality belonging to one owner. Syndicate generally arises due to the concentration of capital, as a result of the merger of the companies, usually made through purchase of shares of other companies but also by permission to use of patents, licenses of parent company by the other members of the group.

Companies included in the syndicate have common management, but a separate legal personality. Its structure is based on the existence of a parent company and a group of subsidiaries which are subject to common management. Settlement of major issues are made by management of parent company, but subsidiary is independent in its day to day, operative business and is not losing its organizational and legal independence.

The main objective of the syndicate may be to reduce competition, increase profits (resulting from the manufacture on a larger scale), strengthening the financial position, and improving economic efficiency, achieving impact on the economic decisions of the state. It may bea form of collusion of manufacturers. The syndicate may also have a more loose structure, similar to the conglomerate. Often, one of a participant in the synicate is a bank that primarily serves all companies in the group.

There are two types of links forming a syndicate:

• vertical syndicate, in which companies combine sequentially according to the stages of production technology
• horizontal syndicate, grouping companies in one industry

Examples of Syndicate

• Video Game Publishing Syndicate: In this type of syndicate, a group of gaming companies will band together to create a joint venture that can help each of them gain a foothold in the international market. The syndicate will focus on marketing, distribution, and technology sharing, as well as capital investments.
• Oil and Gas Syndicate: In this type of syndicate, a group of oil and gas companies will band together to create a joint venture that can help each of them gain a foothold in the international market. The syndicate will focus on exploration and production, technology sharing, and capital investments.
• Pharmaceuticals Syndicate: In this type of syndicate, a group of pharmaceutical companies will band together to create a joint venture that can help each of them gain a foothold in the international market. The syndicate will focus on research and development, marketing, distribution, and capital investments.
• Automotive Syndicate: In this type of syndicate, a group of automotive companies will band together to create a joint venture that can help each of them gain a foothold in the international market. The syndicate will focus on production, technology sharing, and capital investments.

Advantages of Syndicate

A syndicate is a type of oligopoly agreement which is used to facilitate the entry on international markets. It is an arrangement between two or more firms to cooperate on a given venture. The following are some of the advantages of syndicates:

• They allow firms to pool their resources and expertise, allowing them to better compete on global markets. This can be especially beneficial when the firms are of different sizes or have different levels of expertise.
• Syndicates can also provide access to capital and other resources that a single firm may not have available. This can help firms to grow and expand quickly.
• Syndicates can help to reduce the costs associated with entering new markets, as the firms involved can spread the costs over a larger base.
• Syndicates can also be used to reduce the risks associated with entering new markets, as each firm can share the financial risks associated with the venture.
• Finally, syndicates can help firms to gain access to new markets, technologies, and customers, which can be especially beneficial for firms entering new markets.

Limitations of Syndicate

The syndicate is a type of oligopoly agreement which is used to facilitate the entry on international markets. However, there are some limitations to its use that should be considered. These include:

• Limited access to capital: Syndicates often require a large amount of capital in order to become established and to be competitive, which can be difficult for smaller businesses to access.
• Limited market coverage: Syndicates may not cover the entire market that the business wants to enter, which can limit their potential for growth and profitability.
• Complex legal requirements: Syndicates are subject to a number of legal regulations which can be difficult to navigate, and failure to comply with these can result in significant fines and penalties.
• Lack of flexibility: Syndicates can be inflexible and difficult to modify once they are established, which can limit the ability of businesses to adapt to changing market conditions.
• Potential conflict of interest: Syndicates can be prone to conflict of interest between members, which can affect their ability to cooperate and succeed.

Other approaches related to Syndicate

The syndicate is a type of oligopoly agreement which is used to facilitate the entry on international markets. Other approaches related to syndicate are:

• Joint Ventures - this approach involves two or more companies joining forces to undertake a project or venture. It is used mostly to gain access to new markets, technologies, or resources.
• Mergers & Acquisitions - this approach involves one company taking over another, either through an outright purchase or through a merger of two companies. This approach can be used to gain access to new markets or technologies.
• Strategic Alliances - this is a less formal type of agreement between two or more companies that can be used to gain access to new markets, technologies, or resources.
• Licensing - this is a legal agreement between two or more companies whereby one company grants another the right to use a certain product or technology. This approach can be used to gain access to new markets or technologies.

In summary, syndicate is a type of oligopoly agreement used to facilitate the entry on international markets, and other approaches related to syndicate include joint ventures, mergers & acquisitions, strategic alliances, and licensing.

Syndicate — recommended articles

Types of joint venture — Large organizations — International joint venture — Holding — Lateral diversification strategy — Barriers to exit — Business group — Monopoly — Joint venture

References

• Pichler, P., & Wilhelm, W. (2001). A theory of the syndicate: Form follows function. The Journal of Finance, 56(6), 2237-2264.