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.
Hi Justin. This article and your analysis highlights the complexity involved in mergers. Good job!
ReplyDeleteHey!
ReplyDeleteThe plan of a merger between T-Mobile and Orange in the UK has definitely many pros and cons. As you mentioned in your analysis, their merger would benefit from a large customer base. However, the announcment of a merger between two companies in public can confuse many customers who do not have much knowledge in business. They might feel unsecure about buying/using services at either of the two companies and rather look out for another company which meets their needs as well. This is just one aspect, both companies should consider when developing their plan of a merger and handle it carefully.
Juls
Hey Justin
ReplyDeleteCool article...
You have discussed about the advantages and disadvantages of the merge between T-Mobile and Orange. Personally, i would agree that T-Mobile and Orange should merge despite all the disadvantages because ultimately, there are more advantages than disadvantages for the merging of these 2 company.
First, you mentioned that the merging is costly. However, the merged company can benefit from economies of scale which they will become the leader of the industry, having a greater customer bases and are able to set their product's prize in a variety of range. This will definitely increase their sales revenue in a short period of time.
Second, you mentioned that merging of two company may decrease employees' moral and as a result, have a lower efficiency rate. Nonetheless, as you mentioned, this can be solved by restructuring the company and even it may cost a bit, that will not be a problem because their cash flow will increase as the companies merged.
Therefore, weighing the pros can cons of merging, it will definitely be beneficial for T-Mobile and Orange to merge.
But anyhow, good analysis and good article, good job.
Heya Justin!
ReplyDeleteWow, what a great article!
I agree with Angues-- the benefits about the economies of scale you get from horizontal integration far outweighs the legal costs to do so. This is because many resources can now be shared, including staff (which composes a large part of overhead costs).
The company after merger should also consider or set an example to be a leader about CSR incentives. This is because as the size of the company increases, the amount of stakeholders (such as staff, customers) increases, leading the additional influences the organization has to the society.
Furthermore, by the large resources available, the CSR plans can be set quicker and easier. Not only would it probably be beneficial to the society, the merged T-Mobile/Orange company can also use this to set itself as a leader in the industry, and earn positive brand image from the public.