1. Includes a link to the article.
http://news.bbc.co.uk/2/hi/business/8243226.stm
2. Includes a short summary of the article.
This article outlines T-Mobile and Orange’s plan to merge their company in UK. If successful, the new company created will become the dominant power in telecommunications market in UK. However, the merge will be very costly as there are many changes and restructuring that needs to be done.
3. Identifies the topic(s) from our syllabus that the article covers.
1.4 Stakeholders, 1.7 Growth and Evolution
4. Applies one business tool/theory/technique to the organization.
1.7 Growth and Evolution
The article talks about the plan of merging between T-Mobile and Orange. As opposed to a simple strategic alliance or joint venture, merging allow companies to gain an immense amount of market standing very quickly. This is beneficial to the company as becoming the dominant power in the telecommunications industry will allow it to become more influential on the stakeholders in various ways. For example, since T-Mobile and Orange’s newly formed company will become better well known, the company may be able to charge higher prices for their products/services while still having the customer’s support.
Since the company will be pooling together their resources after merging, they will be able to be more competitive compared to its competitors as they are able to set lower prices and offer discounts while smaller businesses may not be able to do so due to the lack of cash flow. Moreover, the merged company will also have a large customer base which comes from the customers from the original companies. Despite the benefits, pooling together resources might also present some problems such as redundancies. This is because both companies operate in the same industry, they might have an excess of capital and employees working on the same things causing lack inefficiency. Although this could be solved by restructuring the company, it would be very costly and troublesome.
By merging, T-Mobile and Orange will be able to benefit from various economies of scale too, namely technical, financial, marketing and monopsony. However, the newly formed company may also face many internal diseconomies of scale as a result of gaining too much market standing. One of which is a lack of coordination of the company due to the greatly increased number of workers that needs to be managed and supervised.
The merging of the companies may also meet interference from various stakeholders, mainly the government. This is because after merging, the new company will dominate the market and use the opportunity to set ridiculous prices after being able to eliminate or weaken other competitors. Since the government may fear the creation of a monopoly, the merge of T-Mobile and Orange may be stopped or be restrained through various methods.
Regardless of the numerous benefits from merging T-Mobile and Orange, there are also some serious drawbacks to this decision. Therefore, both companies should weigh the pros and cons of merging before initiating the plan.
