Company merger is a strategic issue referring to the voluntary amalgamation or combination of two legal entities to form a new legal entity, usually on roughly equal terms. Therefore, company merger is affected pre-merger stock’s exchanges for the new company’s stock. Managers of the each pre-merger company continue to serve as managers while resources of each merging company are pooled to benefit the newly formed company. When two companies that were previously competitors merge, they form horizontally integrated entities. However, when two companies that were previously customer or supplier of each other merge, they form vertically integrated entities. Company merger gives the merged companies with economies of scale and synergies that lead to greater profitability and efficiency (Child, 28). However, company merger also has a downside. Therefore, this paper discusses company merger as a strategic issue, its impact to contemporary organizations and organization structure, as well as global community.
Company merger as a strategic management issue has numerous impacts to the organization. It leads to economies of scale as the newly formed company becomes larger with increased output and reduced costs of production. Reduced cost of production implies that the goods produced are relatively of low prices which increase sales volume beyond break-even sales (Covello, Joseph & Hazelgren, 149). There are different types of economies of scales which include, but not restricted to technical economies with reduced average costs, bulk purchasing with discounts, finance with a better rate of interest, and one head of office rather than two. Additionally, company merger permits greater investment in research and development that leads to more profits as quality goods, and services are offered to the customers, and the profit is used in funding risky investment (Bruno, 71). Furthermore, company merger results in greater production efficiency due to integration of resources such as factors of production and communication systems (Roberts,1). This integration may be useful in restoring closing companies.
However, company merger leads to a cultural clash as merging companies have their own specific organization cultures, which result in conflict of interests. Culture class arises due to a change in the organization structure as a result of merging. An organization structure is useful in the distribution of responsibilities in the organization. The purpose of the organization structure is contribute significantly to the implementation of the organization objectives through allocation of members and resources to the designed tasks, responsibilities, control, and coordination (Child, 6). For example, if a flat organization merges with a hierarchical organization, employees in the newly formed organization experience difficulties while working together (Stacey, 91). Also, company merger has a greater impact on the management of the merging companies due to a job loss especially in higher management position. This change leads to corporate cultural clash where the two merging companies devise policies that in most cases are not in agreement. Equally importantly, a change in the organization structure leads to economic effect on the shareholders. Therefore, shareholders of one company benefit highly due to the hefty amount of dividends as a new company generates greater profits. However, shareholders of the other companies suffer losses due to augmented debt load and merging premium. Additionally, company merger leads to international competition where firms are in a position of dealing with multinational threats (Child, 31).
Master’s programme structure
The module that I believe will provide me with the best insight is the strategic management module. Strategic management module will improve my professional performance by giving ability to formulate, implement and evaluate various organization strategies such as organization competitive strategies, expansion strategies such as a merger, and, sales and marketing strategies. In conclusion, I am completing this master’s degree programme to enhance my management profession and also, improving my future career.
Cassiman, Bruno. Mergers & Acquisitions: The Innovation Impact. Cheltenham [u.a.: Elgar, 2006. Print.
Covello, Joseph A, and Brian J. Hazelgren. The Complete Book of Business Plans: Simple Steps to Writing Powerful Business Plans. Naperville, Ill: Sourcebooks, 2006. Internet resource.
John Child. Organization: Contemporary Principles and Practice. Blackwell Publishing, Malden, 2007. Print
John Roberts. The Modern Firm: Organizational Design for Performance and Growth. Oxford University Press, UK, 2005. Print.
Wieland, Stacey M. Making Sense of Work As a Part of Everyday Life: a Qualitative Study of Swedish Identity Construction. , 2007. Internet resource.