News 1: Microsoft-Nokia move could revolutionise mobile market, competing with Apple, Google
News 2: Microsoft buys Nokia’s handset business
News 3: Microsoft buys Nokia phones: smart move or desperate gamble?
News 4: Washington Post sold to Amazon founder Jeff Bezos
News 5: Fly the merging skies
News 6: VW, Porsche shares gain on tie-up plans
Please Write Your Response in 500 Words
News 2: Microsoft buys Nokia’s handset business
News 3: Microsoft buys Nokia phones: smart move or desperate gamble?
News 4: Washington Post sold to Amazon founder Jeff Bezos
News 5: Fly the merging skies
News 6: VW, Porsche shares gain on tie-up plans
For Grade 8A
__________________________________
New Case Studies Discuss Question
Please read the above mentioned news articles and use the know knowledge in preparing your article for give question.
Its generally said that Mergers and Acquisitions are always in the favour of Multinational companies and big corporate houses, but are against the consumers and government finances.
Discuss up to what extent you agree with the statement.
Submit your article before
February 10th 2014
Please Write Your Response in 500 Words
Note:
1. Write with references.
2. Present market examples in support of your reasons.
3. Marks allocation for this article is 20
Rubrics for Marks.
A. Theoretical Explanation 5 Marks
B. References. 5 Marks [Use Harvard referencing style]
C. Use of Key words. 5 Marks
D. Examples from various Markets 5 Marks
Mergers and acquisitions are made when to firms agree to work together to create products and service for the society. This agreement is mutual for each firms, and it is possible that it could benefit the society. But this decision could prejudice the society too.
ReplyDeleteA merger occurs when two firms join together to form one. The new joined firm will have a new larger market share, which could reduce competition. This reduction in competition can be damaging to public interests. However, mergers can give benefits to the society.
Mergers have a great impact on customers. One of the benefits a merger could give is Economies of Scale. This occurs when a larger firm with large quantity of output reduce average cost. Lower average cost results in lower price for consumers and could save money for the customers. Another benefit is Greater Efficiency. Redundancy are able to be merited if they are employed more efficiently. (1)
There are other benefits like this example, Bank mergers have created numerous bank central money, where customers could visit the branches in nearly everywhere around the world and scale efficiency means increasing interest rates on deposits. Improved customer services has proven to be considered as a benefit for customers. Airline mergers have ensured to keep the industry solvent, and still offers wide arrays of flight options for customers. Many consumers complain about luggage fees and charges for in-flight meals, but the mergers result in a reasonable ticket cost which would in turn reduce complainings
But mergers could also prejudice the society. A merger could increase business size. This sudden growth for the firm could cause the company to build more premises and production site, and could either pollute the air or take up green spaces, especially if both companies are public limited and could easily sell shares and raise capital faster. As said above, mergers are two businesses joining together. This joining could reduce competition, which will damage public and society interests.
An example of how mergers could damage public interest is that in late March 2011, telecommunications giant AT&T announced it would be acquiring T-Mobile. This deal could be profitable for the joining companies, but it could be a damage to interests. So sometimes firms would want to merge with other companies to reduce rivals (sometimes there is a saying for firms, that if you can’t beat them, then buy or join them) which would also reduce competition, and in result it will also make customers find it hard to choose between products. (2)
Some mergers could result in a large concentration of finance. For example, when the P&G Company acquired Gillette in 2005, a news release cited that the increases to the company's growth objectives are driven by the identified opportunities from the P&G/Gillette combination. This is the idea behind, that by combining two companies the financial results are greater than what either could have achieved alone. (3)
In conclusion, Mergers can be beneficial to customers by either have great output and reduce average cost and create lower price for customers or could efficiently employ redundancy which later on could be merited
References :
1. http://www.economicshelp.org/microessays/competition/benefits-mergers/
2. http://www.att.com/gen/press-room?pid=19358&cdvn=news&newsarticleid=31703&mapcode=
3. http://news.bbc.co.uk/2/hi/business/4214485.stm
B. Good work Jonathan,
DeleteYou have give double intro for mergers. You have mentioned the benefits to the firm but benefits or adverse effects on firms, governments and consumers are missing. In Discuss question we should give equal weightage to both side of arguments.
A mergers of takeover are the term refer to consolidation of companies. A merger is when two or more companies join together to form a new company. While a takeover or acquisition is when a company purchase the ownership of another company in which no new company is formed. Multinational companies or MNC are companies that produces and sells good and services in various countries. It can also be referred as international companies.
ReplyDeleteMergers and takeover are always an advantage for the firm. Some advantages are increase in market share, increase in capital because there are two or more firms which join their capital together, increase in output, and increase in quality of output. Internal and external economic of scale to increase production and decrease average cost which include financial economic of scale for example banks are willing to provide loan with special interest rates, purchasing economic of scale for example large firms are able to buy in bulk with special price, marketing economic of scale for example large firms will adveritse their product from commercial, magazine, radio, flyer, banner, or even by seminar. Technical economic of scale which enable advance machinery to produce output efficiently, risk bearing which large firms diverse it’s product to reduce risk. And last the management economic of scale which enable large firms to hire experts and skilled worker.
it’s also beneficial for government as it’s increase tax income, new technology, and lower competition to gain sales revenue. For example Google takeover Motorola which is a vertical integration or company which is joining but have different stages of production. By taking over Motorola Google got a new technology as Motorola provides the hardware and Google provides the software. Another example is when Delta airline takeover Northwest airline which is a horizontal integration as they joining in same stage of production. They can gain economic of scale and increase market share in global daily flights.
But in the same time lower competition might harm small business as they may face difficulties in expanding their business, MNC also bring their profits outside the hosting country, paid lower wage, and erodes traditional culture. In the same time a merger or acquisition may be failed if the enterprise doesn’t make a good relationship each other and fulfill each other needs like transfer of technology. If not It will create a conflict and bad relationship in the joined enterprise. It also will be hard and takes time to break even point if we paid a large price for the takeover and less result.
I am not agreed that generally that mergers and acquisition are always in the favour of multinational companies and big corporate houses, but are against the consumers and government finances.
Nicolas Samuel
References
http://www.investopedia.com/terms/m/mergersandacquisitions.asp
Complete economics for Cambridge IGCSE and O-level, Dan Moynihan and Brian Titley, Unit 4.3, The growth of firms, section 2 how firms grow in size , page 240
Complete economics for Cambridge IGCSE and O-level, Dan Moynihan and Brian Titley, Unit 4.3, The growth of firms, section 3 increasing the scale of production, page 244
http://en.wikipedia.org/wiki/Multinational_corporation
http://finance.mapsofworld.com/merger-acquisition/benefits.html
http://www.mergersandacquisitions.in/benefits-of-merger-and-acquisition.htm
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Sir the originality is 99%
DeleteMergers and acquisitions (abbreviated M&A) are both an aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or new location, without creating a subsidiary, other child entity or using a joint venture. Why some company like merger? Because the company thinks that merger can give positive return to them, with merger, they are doing a good investment and they can control the other company to make higher profit. Some examples of merger in Indonesia are: bank Mandiri. They merge with Bank Bumi Daya, Bank Dagang Negara, Bank Pembangunan Indonesia, and Bank Ekspor Impor Indonesia. They do this so they can more and more profit. The examples of acquisition in Indonesia are: Axis and XL axiata. XL axiata buys axis. Axis allows XL axiata to buy their company because in the past few years, Axis is having a difficult time because of their loss. They are going acquisition in this February for waiting the government’s decision.
ReplyDeleteThere are some advantages of mergers. The first one is economic scale. Larger or increase in output can lower the average cost. Decreasing the average cost enables lower prices for consumer. The second one is international competition. Merger can deal with the threat of MNC and international scale. The third one is merger allows greater investment. Why? Because by doing this they will get more profit. It is a high risk, but the will got a high return in return. This can lead to a better quality of goods for consumers. The next one is greater efficiency. For example, XL axiata and Axis. They acquisition together will reduce the amount employee between two of them. This will reduce the expense of company and the wages of employee. This will merit if they can employed more efficiently. The fifth one is protect an industry from closing. Mergers may be beneficial in a declining industry where firms are struggling to stay afloat. For example, the UK government allowed a merger between Lloyds TSB and HBOS when the banking industry was in crisis.
The disadvantages are higher prices. For examples there are 10 banks, 5 banks merge into 1 then the other 5 banks merge into 1. There are 2 banks left, it means that they have fewer competitions, if the banks have lesser competition, they will monopoly with each other and they increase the interest rate of loan into a higher rate. The second one is that the consumer doesn’t have more choices. If the company have lesser competition, the consumer have limited of choices. The third one is job losses. More employees will become unemployed because the company will reduce the amount of employee that they have and will only seek for the talented employee.
So, the conclusion is that multinational like to use merger and acquisition system. Why? Because the MNCs companies will get more and more profit. They will also produce some quality goods. If they produce more good quality they will be more consumers. The other is that they will have fewer competitors, so that they can earn more customers. For the consumer side, consumer disagrees. Because as soon as the company merger and acquisition, they will increase their prices, consumer also has less choices and job losses.
References:
http://www.economicshelp.org/blog/5009/economics/pros-and-cons-of-mergers/
http://www.economicshelp.org/microessays/competition/benefits-mergers/
http://bizfinance.about.com/od/Basic-Financial-Management/f/why-do-companies-merge-mergers-and-acquisitions-explained.htm
http://en.wikipedia.org/wiki/Mergers_and_acquisitions
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http://tekno.kompas.com/read/2013/09/26/1838432/akuisisi.axis.apa.yang.dicari.xl
ReplyDeleteMergers and acquisitions or also known as M&A is the management and strategy dealing with purchasing and/or joining with other companies. In merger, two business joining together to form a new business. In acquisition, a bigger business buys a smaller business generally. Usually the MNC’s ( multinational companies) or the big company always do the mergers and acquisition thingy.
ReplyDeleteThe mergers and acquisition can be advantages for the firm. The advantages of the mergers and acquisition I that they can eliminate some of the competitors. They can have more chance to be the first firm. The second is increase in market share. They can have many customer because they have distribution channel to the part of the world. They increase in market share because they now produce more goods and service to sell to the customer. They can obtain quality staff or additional skill because they have new better staff and skill from the company that they merge or bought. They can decrease the cost of production/ unit because they have more capital from the company that they merge or acquisition. More profit are earned because they have many customer around the world. The advantage for the merger ( merger only) is that they can have organic growth. The example of a company that success to eliminate the competitor and earned more profit are Sirius XM radio messenger. They start to merge on 29 July 2009. The Sirius radio satellite and XM radio satellite is a rival. They joined force together even they’re rival. They now became the no.1 radio station in Canada together.
There are some disadvantages of mergers and acquisition to the consumer and government. The first is increase and decrease in price. The merge company will increase the price of sales because they have less competitors so they can sell it higher with a good quality. The second is the country can get less the country income because the merge company no need to pay more tax to transport the goods and service to the consumer so the country income will decrease rapidly if there are many merge company. The third is the competitor business will be bankrupt or will decrease it income because there are a business more successful than the competitor so the competitor will not get much money and they’re force to close the business. The fourth is the unemployed rate of the country will increase because the competitor business is closed and the employee and staff who work in the company will be unemployed.
The conclusion is reason why the MNCs or the big house company want to merger and acquisition is because they want to receive more profit, market share, and eliminate competitors without thinking the disadvantages for the consumer, government finances and other people. Many people disagree with the merger and acquisition decision because the people don’t want to get the disadvantages from the merger and acquisition because the disadvantages of the merger and acquisition is very useless.
Galen 8A
Reference :
http://www.mbda.gov/node/1394
http://www.rasmussen.edu/degrees/business/blog/best-and-worst-corporate-mergers/
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Merger and Acquisition or M&A. Merger is two companies that joined together to form a new company.Acquisition is a company that purchases another company but there is no new company formed.It is generally said that M&A are in the favour of MNCs and against government but there are also some effects and disadvantages for MNCs.Multinational company is a firm that has business in more than one country but the headquarter is usually in the origin country.
ReplyDeleteThe benefits of mncs are firstly, it helps the economies of scale.Economies of scale is increase in production units but decrease in average cost or cost of producing the goods.It is seperated by internal and external economies of scale.The internal includes technical, marketing, financial, purchasing and risk-bearing economies of scale.Technical economies means invest in specialized machinery and recruiting highly specialized workers, it is usually for large companies.Marketing is buying their owm vehicles to distribute their goods and services so that it reduces the cost.Financial is when the bank or other lenders lend their money to large business less risky than small business.Purchasing economies is the ability to buy the materials or supplies they need to produce large scale of production.While risk-bearing economies is to reduce the risk of losing a major customer, it is for large firms such as the multinational companies.Second advantage is the ease of transition to new market.So mncs will find it easier to move into new market which it benefits them because it attract more customers and they will gain more profit and achieve their main objective that most firms want which is profit maximization.Aside from that, merger can help mncs to increase their size and growth of firms by market share, number of new employees and raise in amount of capitals.They increase investment in new business and modern technologies or in other name it is called direct inward investment.
Aside of the benefit of mncs, it creates many disadvantages.As for the disadvantage of merger and acquisition by mncs, when they are located in host countries or other countries aside from their own country, they can effect the small firms in that country.Also can increase negative externalities for example: pollution and wastes, also consuming the resources provided in that country by over production of the goods. Mncs sometimes avoid paying taxes to the host countries which it decreases the income of that country or mncs move their business to a low tax country so they can earn more profit.Then, mncs may exploit workers in low wage economies as they need high number of employees for their company because they have large size of firm as a result of merges from other companies.
In conclusion, merges and acquisition by mncs and big corporate houses is not always in the favour as it results many disadvantages to the country and effect the economic such as negative externalities,worker exploitation and tax problems. But there are also benefits like development in economies of scale, ease of transition to new market and lastly increase the size of firms.
References:
1.http://www.questia.com/library/journal/1P3-2680650161/analysis-of-merger-and-acquisition-strategy-of-multinationals
2. http://m.wisegeek.com/what-are-international-mergers-and-acquisitions.htm
3.Complete economics for cambridge igcse and O level,Dan Moynihan and Brian Titley, Unit 4.1, Section 5, pg.200 & 201
4. Complete economics for cambridge igcse and O level,Dan Moynihan and Brian Titley, Unit 4.3, Section 3, pg. 244
Felicia Angeline 8A
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DeleteYou have not mentioned the Originality in your article. Please edit it and mention, as i explained. If any doubt don't hesitate to ask me.
[B] Good work Felicia, good use of Economics terminology like externalities.
DeleteWe should also give detailed explanation , how integration are not beneficial for the consumers and government with the support of the relevant examples.
Merger and acquisitions is the corporate strategies, corporate finance and management in buying or combining between two companies, without creating subsidiary. Big companies and multinational company want to merge together with the other big companies so their company will have the technology and machines that were use in the other company. For example is sonny erricson, the sony company merge with erricson company to create a new products with better quality in order to attract people so they will purchase the goods that are provided by the sonny ecrricson company. The microsoft company buy nokia’s handset business it will be good for the both company but it’s maybe to late because apple and samsung company is controlling the market and it would be hard for the nokia company to join the market and fight with apple and samsung company in their sales and the technology used in both of the smartphones. Big company want to merge with other because there will be no subsidiary created in the process in merger and acquisitions, if the product is demanded by many people the merge company will controll the market sales and gain a lot of profit from the product they provides to satisfy consumer’s needs and wants. I agreed with the statement because it proofs the the mergers and acquisition only happens at big company because big company has the ability to pay there unlimited liabilities where small company have limited funds so there is not many small company that merge to together because it may lead them to bangkrupcy.
ReplyDeleteThe conclusion is that merger and acquisition only happen between big company where they are able to pay for the unlimited liability for both of the company and when big company merge there will be no extra cost need to pay to the government.
Reference: 1. http://www.euronews.com/2013/09/03/microsoft-buys-nokia-s-handset-business/
2. http://www.euronews.com/2013/09/03/microsoft-buys-nokia-phones-smart-move-or-desperate-gamble/
Robin 8a
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DeleteYou have not mentioned the Originality in your article. Please edit it and mention, as i explained. If any doubt don't hesitate to ask me.
Mergers and Acquisitions ( abbrebiated M&A ) are both an aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or locating of origin, or a new field or new location, without creating a subsidiary, other child entity or using a joint venture.
ReplyDeleteAnd the benefits for mergers and acquisitions are it can increase the scale of production because many other large firms is able to enjoy a number of cost advantages over smaller firms. Because when a firm expands the scale of production, it has a chance to become more efficient and lower its average cost of production. Second, by purchasing economies, large firms are often able to buy the materials for their company because the large scale of their production. And ususally offer price discounts for bulk purchases because it is cheaper for them to make one large delivery than several smaller deliveries. Third, marketing economies. Because they can reduce its cost and they does not have to pay the profit mergin of another supplier. Last, financial economies. Which large flirms are usually more financially secure and offer more assets.
If a merger leads to a significant increase in market share, either in local or national markets, the new firm could exercise monopoly power. The legal definition of a monopoly is a firm with more than 25% of the market. If the firm has monopoly power there could be the following disadvantages: First, Higher prices leading to allocative inefficiency). Second, Lower Quantity and reduction in consumer surplus. Third, Monopolies are more likely to be productively inefficient and not produce on the lowest point on the average cost curve. Fourth, Easier to collude. Last, If there is less competition complacency amongst firms can lead to lower quality of products and less investment in new products.
In conclusion, acquisitions and mergers on multinationals are having many disadvantages rather than advantages on a big corporate houses because it may also effects the country, which the disadvantages for the country is that many companies that reducing their workers because of exploit workers, natural resources are exploited and the profits may become switched. And the advantages are because of increasing the scale of production.
References :
a.http://en.wikipedia.org/wiki/Mergers_and_acquisitions#M.26A_objectives_in_more_recent_merger_waves
b. Complete economics for Cambridge IGCSE and O Level by Dan Moynihan and Brian Titley, Second Edition, by Oxford, Page 242 and 244
c.http://www.economicshelp.org/microessays/competition/uk-mergers/
- Celia Pricilla Mesatania 8A-
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DeleteYou have not mentioned the Originality in your article. Please edit it and mention, as i explained. If any doubt don't hesitate to ask me.
MNC is multinational company that have two or more production or manufacturing. Mergers and acquisition determine how firms grow in size based on external growth, which mean that, it is the growth of outside. Mergers is when two company decided to combine each other and they will run the business together in order to make larger enterprise, both of the business have the same rights. While Acquisition or sometimes known as ‘takeover’ occurs when one company buy shares in the ownership of the other company, and they take the overall control. Mergers and aquisition bring some advantages and favour for the multinational company and big corporate houses.
ReplyDeleteMergers and acquisition may bring advantage for multinational company, because in this case, they combine two company into one, and run their business together, which means that they will have larger enterprise. They also will have an increased in the market share, which it can help them to reduce competition. This reduction in competition can be damaging to the public interest, but they will help the firm in order to get more profits. The other advantage is the economies of scale because acquiring a company in the same industry can result in reduced costs due to economies of scale. A major example of the economies of scale involves Wal-Mart, the world's largest retailer. Because of its sheer size, Wal-Mart can often decrease its expenses by buying in bulk and producing large quantities of goods in each production cycle. Acquiring company in the same industry also can make them have larger entity and increased efficiency in production. Mergers also bring advantages for multinational company and big corporate houses, for example they can get more technology from the other company, they can increase market share and they will have greater output, which make them become profitable. The other advantage is the risk – bearing economies, larger firms will have larger number of consumer, sell into more market and overseas, larger than the small business. This make large firm able to reduce the risk of losing a major cunsumer or fall in demand. Producing a varied range of products and expanding into different consumer markets to reduce risk is called diversification. Multinational company and big corporate houses favour this advanatage because it can help them to reduce the risk, increase more profit, with more output.
As it is said before, mergers and acquisition have many advantages, but beside that, they also can bring disadvantage for both of the company. They can increase debt, when you borrow money to acquire a company, that debt goes on the books of the original company. In order to service that debt, we need revenues from the acquired company. Many companies become the target of the acquisitions because they are struggling financially. The other disadvantage is that mergers and acquisition is not always happen successfully, and when it is not happen successfully, it will create conflict between the company. By this, MNCs also get advantage, such as they can take profit by lower the wage costs, can avoid paying taxes, exploit workers, explotation of natural resources, etc.
So, in conclusion i disagree that mergers and acquisition always be the favour of MNCs and big corporate houses, it is true that they will get many advantage by doing mergers and acquisition, but they also bring disadvantage for the for the company, for example, it can increase their debts.
References :
http://smallbusiness.chron.com/advantages-disadvantages-acquisition-another-company-same-industry-31362.html
economics book page 200 and 201
http://yourbusiness.azcentral.com/disadvantages-business-acquisition-11688.html
http://www.economicshelp.org/microessays/competition/benefits-mergers/
vienetta christina 8a
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DeleteYou have not mentioned the Originality in your article. Please edit it and mention, as i explained. If any doubt don't hesitate to ask me.
[B] Good Work,
Deleteyou have presented good argument that large benefit more due to economies of scale. If you disagree you have to present the views representing large firms benefits more consumers and government. In Discuss question more emphasis should be on the detailed reasoned explanations.
A merger occurs when the owners of one or more firms agree to join together to form a new, larger enterprise. A takeover or acquisition occurs when one company buys enough shares in the ownership of another so it can take overall control. This may happen with or without the agreement of the owners to the other company. Merger and acquisition are both horizontal integration.
ReplyDeleteM&A’s have many advantages for MNCs and big corporate houses, that’s why it is generally said that M&A’s are always in the favor of MNCs and big corporate houses. Some main advantages are it increases economies of scale, like the employment of more specialized machines and labour, and the spreading of administration costs and bulk-buying. Very large firms are also formed which may be able to dominate their market. They may be able to raise prices and reduce competition by creating entry barriers for new firms.
Even though M&A’s have many advantages for MNCs and big corporate houses, there is also some disadvantages. Some disadvantages of M&A’s are culture clash, reduce in competition, and diseconomies of scale. What is meant by culture clash is that if two firms have very a different business, conflicts can arise. For example, if there is innovative, entrepreneurial companies with a flat hierarchy were to merge with a highly hierarchical, conservative and traditional business, the employees in the new business would be likely to have difficulties working together. It reduces in competition because horizontal integrations are able to raise prices and reduce competition by creating entry barriers for new firms. Other disadvantages, when a business merges, sometimes it will get an increase in economies of scale. But, it is not always happening, sometimes when two firms merge, the larger firm will create diseconomies of scale, the opposite of economies of scale.
Like it is said, M&A’s are against the consumers and government finances, it is because M&A’s have so many disadvantages for both consumers and government finances. Some disadvantages are like when business mergers, they no need to pay tax, so the country is getting poorer because they earned fewer taxes from the nation. Other disadvantages are unemployment. Of course, when a business mergers, they’re employee will become one. Before, they merge, each firm have their own employee, but after they merge, they’re employee is into one. If there is too much unemployment, there will be many poor peoples or beggars in the nation, which is a disadvantage for the government. And pollution can be also one of the disadvantages, because when too much company merges, it will be a big company and create pollution from the smokes.
So in conclusion, it is true that M&A’s are more in favor of multinational companies and big corporate houses, but some firms did not want to do M&A’s because there are also some disadvantages of M&A’s like culture clash and diseconomies of scale. For the government, too much M&A’s in firms make the government stress because the nation’s tax will be decreasing and there will be many unemployment.
References :
1. Complete Economics for Cambridge IGCSE & O Level
2. http://www.ehow.com/info_8199594_disadvantages-merging-companies.html
3. http://wiki.answers.com/Q/What_are_some_advantages_and_disadvantages_of_horizontal_integration?#slide=12
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Mergers and acquisitions also known as M&A can benefit MNCs and large firms. MNCs that buys other small firms will be able to further their research and develop their product.Large firms that merge with other large firm will be able to increase their revenues and they would have more capital.
ReplyDeleteMNCs can benefit from buying other firms, for example, Microsoft buying Nokia's handset company, by buying Nokia, Microsoft have gained all of Nokia's research.They can now also use compete with other large firms in the smartphone market.By buying Nokia, Microsoft's market share would increase and their revenue would also increase.Their products will also develop with the help of Nokia's research, and by developing their product, their customers would be more satisfied and soon enough, the world would be interested to buy their products.For other large firms, by buying 1 smaller firm, they could gain similar advantages that Microsoft gained from buying Nokia.As for mergers, it can increase their market share and their capital,it can also help them compete with other larger firms.Because by combining, you add both firm's "strength" together.It would make a very big firm. For example, the merger of American Airlines and US Airways group,if both of them merges, it could be the birth of the world's biggest airline.The new firm would have a lot of capital, and their market share would also increase.
But if an MNC decided to buy another firm to develop their products, the price of that product would certainly increase, because when developing a product, it will require a lot of money, and they are trying to cover that amount by selling their products with a higher cost.This would make customers unhappy, even if their product has more quality, if the price of the product increases drastically, they won't buy it, now some people couldn't even afford it.When 2 firms merge, their products will also develop, and the same thing will happen to their customers, they won't be able to buy their products.
The conclusion is that I agree wit the statement above,M&A can benefit MNCs and firms, but it wouldn't benefit their customers, the prices of the firm's products will increase and they won't be able to afford it.
References:
1.http://www.euronews.com/2013/02/14/fly-the-merging-skies/
2.http://www.euronews.com/2013/09/03/microsoft-nokia-move-could-revolutionise-mobile-market-competing-with-apple-/
3.http://www.euronews.com/2013/09/03/microsoft-buys-nokia-s-handset-business/
4.http://www.euronews.com/2013/09/03/microsoft-buys-nokia-phones-smart-move-or-desperate-gamble/
Jovan Pan 8A
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DeleteYou have not mentioned the Originality in your article. Please edit it and mention, as i explained. If any doubt don't hesitate to ask me.
A Merger is the joining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for their stock. A merger is basically when two or more firms in the same industry mutually agrees to combine or ‘merge’ to make one larger company. An acquisition is a corporate action in which a company buys most or even all of the target firm's ownership stakes or stocks in order to gain control of that firm. Acquisitions are often made as part of a company's growth strategy where they considers that it is more beneficial to take over an existing company's operations compared to expanding internally or growing organically on its own. Acquisitions are often paid in cash, the acquiring firm's stock or a combination of both. Acquisitions can be either friendly or hostile, friendly acquisitions occur when the target firm agrees for itself to be acquired, while in contrast, hostile acquisitions don't have the same agreement from the target company, and the acquiring firm needs to actively purchase large stakes of the target company in order to have so much stakes, the target company loses its control of itself. In either case, the acquiring company often offers a premium on the market price of the target company's shares in order to encourage shareholders to sell their proportion of shares.
ReplyDeleteThere are 2 types of business integrations: vertical and horizontal. Vertical integration consists of forward, backward, and lateral integration. Vertical integration occurs between firms at different stages of production, an example of this is Carnegie Steel Company. Carnegie Steel owns mills where their steel were made, the mine where the iron ores are extracted, the mine which supplies coal, the ships that transported the iron ores, railroads that were used to transport the coal, and the coke ovens where the coal was cooked, and many more. The overall integration is called the vertical integration. The integration between Carnegie and the iron mine is a backward integration. Lateral integration occurs between firms in different industries in either the same or different stages of production. Horizontal integration involves a merger or takeover of firms engaged in the same stage of production in the same industry, an example of this type of integration is the merger of American Airlines and US Airways group which will join together to make the world’s biggest airline in terms of commercial or passenger traffic and a combined equity value of about $11 billion. In the case of the merger of American Airlines and US Airways, consumers end up paying more for airline tickets in general, and have less convenience because typically there are cutbacks in flights and schedules during mergers. Government finances can be taken advantage of. If a multinational company decides to takeover a big local company, they have the right to shift their profits in the host country into somewhere else where taxes are less, hence local government finances do not receive the payments the company should pay, and is exploited.
ReplyDeleteIn contrast, some cases of mergers or acquisitions can benefit both the companies and consumers, or even the government finances. An example is the merging of Microsoft® with Nokia™. As reported in EuroNews (.com), Microsoft is going to use Nokia to enable itself to compete with smartphone company giants: Samsung and Apple, which owns over 70% of today’s smartphone market. If Microsoft managed to succeed in increasing its market share in the smartphone industry, both Samsung and Apple will see it as a significant competitor. If they are afraid Microsoft can eventually take over or reduce their market share, or even decrease their revenue (not necessarily profits), they may begin to improve either their quality or price. In terms of quality, Apple might decide to further increase their currently high-quality iPhones, but only slightly increase the price so they won’t have much less profits, high-class consumers should be more satisfied with a better phone and may not be affected with the price rise. On the other hand, Samsung may have difficulties in increasing their quality, so they can reduce the quality and price, which will not be good for high-end Samsung consumers, but will allow a greater number of less wealthy people to purchase it.
ReplyDeleteTo conclude what I have discussed, I do agree with the statement given, because the chances of large, money-greedy firm wanting to further benefit us by expensively merging or acquiring another firm with great costs, are very slim, but not absolutely impossible.
Ivan Alexander / 8A
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References:
http://www.scribd.com/doc/114346457/Merger-and-Acqusitions
http://www.investopedia.com/terms/m/merger.asp
http://www.investopedia.com/terms/a/acquisition.asp
http://en.wikipedia.org/wiki/Vertical_integration
http://www.euronews.com/2013/02/14/fly-the-merging-skies/
http://www.euronews.com/2013/09/03/microsoft-nokia-move-could-revolutionise-mobile-market-competing-with-apple-/
[B] Good Work Ivan,
DeleteIn your work 50 per cent weightage you have given to the introduction and very less is mentioned about the question i asked. Introduction is generally 20 %, 30 % favour argument, 30 % counter argument and 20 % weightage to conclusion. Stay focused on the statement that is answered, i think you have deviated from the question.
Mergers and acquisitions, or M&A for short, is a form of external growth done by firms. M&As are beneficial to companies as they allow them to reduce competition, expand their market base, gain market share, and ultimately earn more revenue. Multinational companies are firms that have operations in more than one country, such as production and/or sales. However, it is managed from only one country. Mergers and acquisitions may or may not benefit consumers and government finances.
ReplyDeleteMergers and acquisitions are done by companies mainly for their own benefits. M&As help companies to improve in various aspects, such as gaining new technology, more skilled employees, better management and more capital. The primary goal of mergers and acquisitions is to create value for shareholders that exceed the cost of the acquisition. The potential financial gain of an M&A, known as synergy, is usually the motive behind mergers and acquisitions. Firms hope that the combining of their firms will generate more profits rather than the two firms operating singularly (2+2=5). The two leading M&A efficiency theories are the disciplinary and synergestic merger theories. Synergies represent the extra value earned from a takeover or merger. Synergies fall into two categories: cost synergies and revenue synergies. Cost synergies is the ability to cut costs as a result of the combining of operations. This can be done by reducing the number of unneeded employees, eliminating surplus facilities, and increasing purchasing power as firms with larger size tend to own more bargaining power. Revenue synergies, in contrast, refer to the capability of increasing prices or sell more products or services due to the M&A. These include selling complementary products, accessing a new market through the existing market of the takeover business, reducing competition and sharing distribution channels. However, M&As may also bring benefits to its consumers and the government of the host country. Mergers and acquisitions increase the size of the firm, therefore enabling economies of scale to happen. In a competitive market, firms which are able to reduce their costs is most likely to reduce their prices. Consumers would then be able to pay a cheaper price for products of the same or better quality. Mergers and acquisitions allow greater investment in research and development, because they provide more capital to be used to finance risky investments. Research and development produces goods of higher quality, and they are very important in industries such as pharmaceuticals. Government finances may also be benefited by takeovers. Takeovers prevent an industry from shutting down when a firm is failing or is facing drastic losses. This is especially important in the banking industry. Without the existence of acquisitions, the government would be forced to buy failing banking companies to avoid a crisis. An example is the 2007-2008 financial crisis, which is considered to be the worst financial crisis since the Great Depression. It resulted in the threat of total collapse of large financial institutions, the bailout of banks by national governments, and downturns in stock markets around the world. One of the results to the crisis was the collapse of Washington Mutual Inc, the country’s largest savings and loans bank. Even though it has $307 billion in assets, the frenzied government considered it not to be ‘too big to fail’. Therefore, federal regulators seized WaMu and the bank was sold to JP Morgan Chase & Co for $1.9 billion. The collapse pronounced the biggest banking failure in U.S. history, far bigger than that of Continental Illinois, which failed in the 1980s and had only $40 billion in assets. The buyout preserved depositors’ money. However, shareholders and creditors are faced with a great loss. The takeover of WaMu was the second time JP Morgan & Co. became ‘buyer of last resort’. Previously the same year, it purchased the failing Bear Sterns Co., getting a $29 billion backstop from the federal government.
In contrary, M&As are not always successful to a firm. Mergers and acquisitions may become failures to companies involved in the takeover or merging. This may be caused by cultural differences between the companies, or redundancy in several positions in the firm because the other firm might have someone working in that spot. A drastic change in management policies before and after the M&A may create restlessness and annoyance among employees. For example, a company which has very flexible management before the M&A may become a very monitored and strict management afterwards, causing discomfort in previously hired employees. Many workers will lose their jobs after an M&A because of redundancy mentioned before, and more skilled employees may seek jobs in other firms when an M&A happens. The company would then lose its most valuable employees. Trade unions may also create strikes or work slow-downs when workers are treated unfairly, halting production of the newly formed entity. One of the largest – or possibly THE largest – business failure of all time is the merging of America Online (AOL) and Time Warner. The merger between AOL and Time Warner created the largest media company and cost $182 billion which was the largest merger at the time. It combined the top internet provider in the United States and the world’s largest media conglomerate. “The trail of despair in subsequent years included countless job losses, the decimation of retirement accounts, investigations by the Securities and Exchange Commission and the Justice Department, and countless executive upheavals. Today, the combined values of the companies, which have been separated, is about one-seventh of their worth on the day of the merger.” – (Dealbook, 2010 – NY Times). Mergers and acquisitions are also not always beneficial to consumers. A research done from BusinessWeek with data obtained as part of the American Customer Satisfaction Index reported that customers are less satisfied with companies after mergers. Satisfaction scores are based on consumers’ perception of the companies’ prices, its ability to meet expectations and its quality. Consumers gave at least a lower mark in one of these aspects for 50% of the deals. For example, the mergers of Exxon Mobil Corp. and BP PLC caused customer satisfaction ratings to plunge. Customers of BP felt that they had 13% less value for their money for price and quality after the merger with Amoco. Exxon Mobil customers had 14% less value for their money and the service quality dropped by 5%. Mergers and acquisitions also create monopoly in the market by reducing competition. This way, companies can increase prices of their goods or services. Government finances of a host country in a multinational M&A are usually also facing losses. Multinational M&As may transfer profits and spread costs over a few countries to prevent paying local taxes. Multinational M&As may also do lobbying to exploit the natural resources of the host country, and the government is forced to agree for money needed by the country. This is the reason why multinational M&As mostly locate in LEDCs which does not have very strict rules and regulations about exploitation of natural resources.
ReplyDeleteIn conclusion, mergers and acquisitions are always in favour of multinationals and large corporate houses, even though they may fail at times. M&As may also cause disadvantages to consumers such as lower customer satisfaction and to government finances by refusing to pay taxes. However, they may also provide benefits in the long term for consumers and government finance such as cheaper prices and protecting industries from shutting down.
References:
ReplyDeletehttp://www.tutor2u.net/blog/index.php/business-studies/comments/qa-what-are-synergies-in-takeovers-and-mergers
http://www.investopedia.com/terms/s/synergy.asp
http://www.economicshelp.org/microessays/competition/benefits-mergers/
http://online.wsj.com/news/articles/SB122238415586576687
http://www.cnbc.com/id/47874555
http://www.businessinsider.com/bad-acquisitions-2011-8?op=1
http://www.businessweek.com/stories/2004-12-05/why-consumers-hate-mergers
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[A*] Excellent work Alicia.
DeleteIn the era of global economic crisis, mergers and acquisitions are strategic decisions taken for maximize a company's growth. Action done by increase its production and marketing operations. They are being used in a wide arrangement of fields such as information technology, telecommunications, and business process outsourcing as well as in traditional businesses in order to gain strength, expand the customer base, cut competition or enter into a new market or product segment. Merger is one strategy taken by the company to develop the company. Merger means joined together, fused or in combination that led to the loss of identity due to swallowed something. So, the definition of a merger is a combination of two or more companies that then there's only one company that has survived while others stop their activities. Companies merge and split their resources to achieve a common goal. The shareholders of these companies often remain in the position as co-owners. Acquisition is the incorporation of a business where one company acquires control of a company operating in the acquisition of certain assets by providing, recognizes a liability or issue shares, in other words, the acquisition is defined as an agreement, a company buys assets or stock of another company, and the holders of the other companies that were targeted acquisition ceases to be the owner of the company.
ReplyDeleteThe main objectives of mergers and acquisitions are first, accelerates a growth of company, especially when the internal growth is constrained due to lack of resources. Internal growth requires that a company should develop its operating facilities, such as manufacturing, research, marketing, etc. But, lack of resources and time needed for internal development may constrain a company pace growth. Because of that, a company can get production facilities as well as other resources from outside through mergers and acquisitions. Especially, for entering in new products/markets, the company may lack technical skills and may require special marketing skills and a wide distribution network to access different segments of markets. The company can acquire existing company or companies with requisite infrastructure and skills and grow quickly. Second, increase profitability because a combination of two or more companies may result in more than average profitability due to cost reduction and efficient utilization of resources. The third is diversifying the risks of the company, particularly when it acquires those businesses whose income streams are not correlated.
On the opposites, merger of two companies can bear potential disadvantages, first, culture clash, When two firms merge, it is more than a coming together of two names or brands. It is a real merger of people who bring along a specific corporate culture. If two firms have very different corporate cultures, conflicts can arise. Second, diseconomies of scale, When businesses merge, it is often to achieve economies of scale. Larger organizations are typically able to produce goods and services more efficiently and at a lower per-unit cost than smaller businesses because fixed costs are spread out over a larger number of units. Thirdly, Consumer Perceptions, When two companies merge, they need to consider how consumers view the two firms and whether or not they view them in a compatible way. For example, if an environmentally friendly soap company were to merge with an industrial detergent manufacturer with a poor environmental track record, it may alienate the customers of the environmentally friendly soap company who don't want to support a company that is not environmentally responsible. Fourth, lay-offs, Merging two businesses is often a good method for reducing the labor force of the two organizations.
The most concrete example occurs at state banks in Indonesia where at the time of the 1997 crisis, the government merged the four banks, namely Exim Bank, Bumidaya Bank, Dagang Negara Bank and Bapindo Bank be only one bank, Mandiri Bank. Initially, the government does bear the losses due to merger cost, but we can see the results today in which Mandiri Bank is the largest bank in Indonesia.
ReplyDeleteFrom the description above about merger and acquisitions, we can conclude that mergers and acquisitions are not always detrimental to the customer and government finance. It's based on previous description where in addition there are disadvantages, there are also things that are advantages. Even in developed countries, large companies in developing their businesses mergers and acquisitions in cross country.
References:
http://business.gov.in/growing_business/mergers_acq.php
http://www.ehow.com/info_8199594_disadvantages-merging-companies.html
http://eprints.undip.ac.id/29463/1/Skripsi005.pdf
http://www.ccsenet.org/journal/index.php/ijbm/article/viewFile/16102/11816
Originality: 91% (plagiarisma.net)
[B] Good work Putri,
DeleteYou have put in lot of efforts and I appreciate it.
At some instances you have deviated from the question. Good essays need to be focused around the question.
Acquisition and mergers means of growth of size of a firm or company directly or instantly. The term acquisition means that a firm or company buys or purchases another firm which by buying the other firm, they would have the technology and information of the firm and the patents of the firm. By acquisition the workers would also work in the new company and the skills would be for the company. As mergers it means that 2 firms usually with same size joins and work together. By this 2 firms joining together all profit and revenue would be divided equally. Companies use both acquisition and merger terms to increase their market share and increase of profit and revenue. By acquisition and merger production would be faster and the quality of the product would be higher because of an increase of capital and technologies. Some example of acquisition and merger are Bharti Airtel which acquired Kuwait based Zain Telecom's African Business for $10.7 billion dollar. By this the right patent of Kuwait would be Bharti Airtel's and all Kuwait's technologies would be theirs. Or in other words they would buy the position of owning the company. While a example of merger is when Reliance Communication merged its telecoms tower business with GTL infrastructure LTD for $11 billion. These means that they would work together. Mergers and Acquisition are both integration, which there are 3 types of integration which are horizontal,vertical,and Lateral Integration. Horizontal means that they produce the same stage of product, while vertical means that have different stage of production. And lateral means that they have different stages of production and different market.
ReplyDeleteBy acquisition for the company it makes the company have more technologies and they will have the patents of the company which production would be more efficient and faster. As it needs a long time for the growth by acquisition they would have the growth faster. For the MNC company there be an increase of profit for them. As higher technologies the cost of production would be less and the revenue would be more. And by merging companies could both have more efficient time for the company to produce and they could produce higher quality goods as they join together their technologies.
For consumers as companies acquisition the price would be higher ad the quality, but it would make consumer harder to buy if the price increases.And for the government they need to subsidies more as the price increases, so more people could still purchase and consume the product. As merging consumers also would not really aggree because it could both increase the price and the product could be changed the quality that they are already satisfied. And for the government they should subsidies the price of the product as the product increases its price. An example of Merging are Exxon and Mobil
The conclusion is that Acquisition and merger could increase the profit of the MNC company. While acquisition and merger for the cnsumer is that they don't like that the price is increasing and for the government is that they need to subsidies more.
Refference: http://t.answers.com/answers/#!/entry/what-is-the-latest-example-of-merger-and-acquisition,504ce9ca444f67894753c9af/2
Originality :98%
Brian.A
8A
[B] Good Work Brian,
DeleteYou have put in lot of efforts and was able to focused on the question. I see you have emphasised more on the introduction part and has not cover the body part appropriately. In discuss question 20 % Introduction, 30 % argument favour, 30 % argument against and 20 % weightage to concluding part. If have any confusion don't hesitate to ask me.
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ReplyDeletevienetta christina 8a
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Felicia Angeline 8A
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A merger occurs when two firms join together to form one. The new firm will have an increased market share, which reduces competition. This reduction in competition can be damaging to the public interest, but help the firm gain more profits. One way a merger can benefit society is when two weak companies merge to form a strong company. This type of merger can save many jobs, of which benefits society.
ReplyDeleteHowever, mergers can give benefits to the society
1. Economies of scale. This occurs when a larger firm with increased output can reduce average costs. Lower average costs enable lower prices for consumers. Vertical merger would have less potential economies of scale than a horizontal merger e.g. a vertical merger could not benefit form technical economies of scale. However in a vertical merger there could still be financial and risk-bearing economies.
2. International Competition. Mergers can help firms deal with the threat of multinationals and compete on an international scale.
3. Mergers may allow greater investment in R&D This is because the new firm will have more profit which can be used to finance risky investment. This can lead to a better quality of goods for consumers. This is important for industries such as pharmaceuticals which require a lot of investment.
4. Greater Efficiency. Redundancies can be merited if they can be employed more efficiently.
5. Protect an industry from closing. Mergers may be beneficial in a declining industry where firms are struggling to stay afloat. For example, the UK government allowed a merger between Lloyds TSB and HBOS when the banking industry was in crisis.
6. Diversification. In a conglomerate merger two firms in different industries merge. Here the benefit could be sharing knowledge which might be applicable to the different industry. For example, AOL and Time-Warner merger hoped to gain benefit from both new internet industry and old media firm.
For example: The main benefit from a merger of two companies can provide better efficiency, which can result in lower prices for the consumers. There would be one number for customer service as well.
Merger and acquisitions (M&A) to boost revenue for a multinational company and a great company, because the M & A (mergers and acquisitions) make target and company's shares increase. Consumer and the government finance does not support merger of multinational company and big company because finance government would provide large tax if the income is great and some consumers have wants and needs are different which causes the merger does not go well
Big oil got even bigger in 1999, when Exxon and Mobil signed a $81 billion agreement to merge and form Exxon Mobil. In 2008, ExxonMobil occupied all ten spots in the “Top Ten Corporate Quarterly Earnings” (earning more than $11 billion in one quarter) and it remains one of the world’s largest publicly held company. But government not favor the merger because when the big company get a big income, they will get a big taxes. Than the consumer too not favor the company because some people doesn't like the merger.
Reference:
www.ramussen.com
www.investopedia.com
originality: 65%