A merger means a business approach where one firm is combined with another and they work as a single independent entity. For any company to concur on mergers, it must have the same scale and size of operations. The purpose of getting a merger is to obtain a wider market and a customer baseline. Additionally, merging can offer a collaborative effort to deal with competition and achieve economies of scale (Baye & Prince, 2014). A merger is different from acquisition and receivership because there is no permanent takeover of a company by another. Star Computer and a small communications firm have decided to form a business collaborative base through merging. It is one of the requirements when a company fears bearing the risks and liabilities that occur. This paper explains how merging between two companies is beneficial to society.
Social Benefits of Merging
One of the most important social benefits of merging is that it obtains easier access to skilled labor. This means there will be an integration of employees in the newly formed entity. Therefore, the new firm will need to expand due to the powers combined, and will require more employees (Baye & Prince, 2014). When firms hire to fill the positions, society benefits because people who have relevant skills will be hired, hence creating a social booster in people’s lives. When people have jobs, the social stratification perspective is achieved, and the mobility will be advanced for a given community where the merging occurs.
There are new possibilities that are offered in the market when two companies form collaborative bases in business. It means that product accessibility will be enhanced hence consumers in the society will purchase goods and services without problems (Baye & Prince, 2014). The new market comes with new ideas that can be combined to offer convenience in standardizing and customizing products. For example, if two companies from different regions form a merger, there are chances that due to the interaction, a distinct culture between the two firms will be shared among the employees, suppliers, clients, and other stakeholders (Baye & Prince, 2014). Therefore, merging can help a community learn different aspects of culture related to the products.
The formation of mergers affects prices most of the times where consumer buying behavior is affected. It is a common practice for companies to lower the price to get more attention for their new portfolio. Therefore, when prices lower, buyers will have more power and may have chances of disposing of their income more (Baye & Prince, 2014). That aspect leads to improved living standards for people if they can acquire the products at a lower price. However, due to the uncertainties involved, mergers can be affected by prevailing market barriers, thus increasing the price. When the price is increased for products, many people may be unable to afford basic commodities in the market, leading to poor living standards.
The board member should consider accepting the merger since the society will have some benefits, as shown in the analysis. Merging opens opportunities for jobs where people can be hired to add energy to the new workforce. Securing employment is one of the motivating factors in society. Additionally, the paper has revealed that some products may be available in the market compared to the previous moments before the merger. Two companies should undertake the process since it may lower prices, hence growing consumer buying capability, which improves society’s living standards.
Baye, M., & Prince, J. (2014). Managerial economics and business strategy (8th ed.). McGraw-Hill/Irwin.