ECO550 Week 8 Discussion 1 and 2 Name Course University 2014
From the scenario for Katrina’s Candies, examine the major implications for firms entering into a merger. Explain the criteria the U.S. Department of Justice and the Federal Trade Commission would follow when deciding on whether or not to approve a proposed merger. First of all, a merger is a type of expansion in which two firms that is of a similar size merge together to form one company. This one company can have a name that includes both pre-existing companies or can just take the name of the dominant firm out of the two. A merger can be a vital way to help with the immediate penetration of an existing market and it may lead to less manufacturing costs than it would normally incur. Also, a merger should take place if the incremental value is 50% or more. Furthermore, a merger can lead to value creation as well as an increase in the economies of scope, like branding, and name recognition. A few examples of some mergers in the last decade or so are Daimler Chrysler and Sirius XM. Here are a few types of mergers taking place in the marketplace: vertical, horizontal, product extension, and market extension. Vertical deals with suppliers and customers, horizontal deals with the competition, product extension deals with complementary products, and market extension deals with complementary markets. The biggest challenge faced by possible mergers is the cultural differences amongst different countries. If a merger can overcome this challenge, they will have much success. A set of guidelines was introduced in 2010 by the Federal Trade Commission and the Antitrust Division of the Department of Justice. The guidelines state...
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