Cause and Effect Essay
Cause and Effect Essay
Fargo Chen
In mathematics, equation 1 + 1 =2 is always correct. However 1 + 1 is equal to much more than 2 in the business context. The process that two companies are combined or a company takes the form of other company is known as merger and it produces wealth for a company which normally is much greater than the result of simple addition. Mergers are often described as a marriage of two companies that decided to combine their financial, managerial and operational functions to form a new company. (Don, 2010) Additionally, the new company after combination is able to share resources and business objectives. The purpose of this essay is to evaluate a reason for merger and discuss the effects for two companies during merger.
In the real business world, there are a number of reasons for companies to merge. For a well-established market, such as mobile phone market, the industry is fragmented and full of intense competition. A merger allows two companies to reposition themselves into a stronger position and improve their competitive market position by reducing competition and sharing resources and distribution channels. (Don, 2010) To improve company’s finance is another motive for merger. A larger company may have better financing ability in the capital markets than a smaller one and it may also acquire the debt of a small company if it is in trouble financially. (Peavler, 2003) Moreover, mergers also lead to cost reduce, economies of scale expansion and raise capital in the financial. In addition, diversification is also a reason for company merger. They aim to reduce risk through investment and do not put all eggs in one basket by investing in one particular industry and buy another company in another industry. (Peavler, 2003)
The effects of mergers on employee morale can allow them to feel stress and fear of uncertain future. After merger, changes of mangers, working environment and company culture may lead to stress for employees
Fargo Chen
In mathematics, equation 1 + 1 =2 is always correct. However 1 + 1 is equal to much more than 2 in the business context. The process that two companies are combined or a company takes the form of other company is known as merger and it produces wealth for a company which normally is much greater than the result of simple addition. Mergers are often described as a marriage of two companies that decided to combine their financial, managerial and operational functions to form a new company. (Don, 2010) Additionally, the new company after combination is able to share resources and business objectives. The purpose of this essay is to evaluate a reason for merger and discuss the effects for two companies during merger.
In the real business world, there are a number of reasons for companies to merge. For a well-established market, such as mobile phone market, the industry is fragmented and full of intense competition. A merger allows two companies to reposition themselves into a stronger position and improve their competitive market position by reducing competition and sharing resources and distribution channels. (Don, 2010) To improve company’s finance is another motive for merger. A larger company may have better financing ability in the capital markets than a smaller one and it may also acquire the debt of a small company if it is in trouble financially. (Peavler, 2003) Moreover, mergers also lead to cost reduce, economies of scale expansion and raise capital in the financial. In addition, diversification is also a reason for company merger. They aim to reduce risk through investment and do not put all eggs in one basket by investing in one particular industry and buy another company in another industry. (Peavler, 2003)
The effects of mergers on employee morale can allow them to feel stress and fear of uncertain future. After merger, changes of mangers, working environment and company culture may lead to stress for employees