Mergers and Acquisitions...
Has anyone noticed the large number of companies worldwide that have been merging?
Take the following facts for example:-
Oracle bought over Peoplesoft. The former was the 3rd largest producer of applications software in the world, while the latter was the 2nd largest application vendor.
Symantec and Veritas merged. That is a merger of the security company and a data warehousing/backup company.
HP and Compaq merged a few years ago.
The 6 largest banks in the US 12 years ago are now the top 2 banks in the US representing assets of trillions of dollars.
These are few of the many examples that exist. Similar mergers have been seen in automobile industry, electronics, computer hardware, insurance etc.
So where does this led to? Is it for the good for the consumers or bad. It’s quite unrealistic to comment on that. But one fact seems to be emerging i.e. most markets are heading into a duopoly throughout the world. Examples
Oracle and Peoplesoft virtually rule the Application development industry. Oracle has its advantage wit one of the biggest Database systems under its arm as well.
HP and IBM seem to be competing on the world's server hardware market though Hp does not seem to be doing well.
IBM and Microsoft focus on the software side of the Servers.
Think of chip manufacturers and all you can think of is Intel and AMD.
The retail computer market is virtually led by Dell worldwide apart from some local manufacturers in some nations.
US banking is led by Citigroup and JPMorgan
Most of these two leaders in each industry are still not satisfied and are looking for other companies for acquisition which may increase their market share. This means that you can see a lot more mergers in the next few years.
So what happens if most industry is dominated by 2 giants? Many would say that you can expect a fierce competition that will eventually benefit the consumer.
The problem lies exactly here, most corporations are smart enough to realize that there is always market for 2 players. Entering a competition would not be in the best interests of either of the company. Most duopoly markets/industry enter a comfort zone where competition is reduced to means of driving the consumer/market rather than driving out the other competition.
But what happens if the 2 leaders were to enter into a fierce battle for the market share? The consumer may benefit in the short term, but will not like it for long. If one of the companies is driven out, you have a monopoly.... and no one likes a monopoly. Some may wonder what are the regulators doing all this while. They will obviously try and save a fallen competition to avoid a monopoly... but do keep in mind that we are talking about companies that have billions or trillions in assets and saving a company that big will definitely burn a big hole in the govt's pockets. eventually it’s the taxpayers who will suffer.
And if you think that this is where the story ends..... that’s not it. Duopoly also minimizes innovation and research. If you look at one of the biggest and the oldest duopoly in the world i.e. the airline industry, you will notice that it has remained it has not evolved in the past few decades. It used to take 6 hours to fly from Singapore to New Delhi 20 years ago and it still takes the same time.
You surely do not want the same to occur to computers where a new computer chip will run at the same speed as the one 20 years old.
Take the following facts for example:-
These are few of the many examples that exist. Similar mergers have been seen in automobile industry, electronics, computer hardware, insurance etc.
So where does this led to? Is it for the good for the consumers or bad. It’s quite unrealistic to comment on that. But one fact seems to be emerging i.e. most markets are heading into a duopoly throughout the world. Examples
Most of these two leaders in each industry are still not satisfied and are looking for other companies for acquisition which may increase their market share. This means that you can see a lot more mergers in the next few years.
So what happens if most industry is dominated by 2 giants? Many would say that you can expect a fierce competition that will eventually benefit the consumer.
The problem lies exactly here, most corporations are smart enough to realize that there is always market for 2 players. Entering a competition would not be in the best interests of either of the company. Most duopoly markets/industry enter a comfort zone where competition is reduced to means of driving the consumer/market rather than driving out the other competition.
But what happens if the 2 leaders were to enter into a fierce battle for the market share? The consumer may benefit in the short term, but will not like it for long. If one of the companies is driven out, you have a monopoly.... and no one likes a monopoly. Some may wonder what are the regulators doing all this while. They will obviously try and save a fallen competition to avoid a monopoly... but do keep in mind that we are talking about companies that have billions or trillions in assets and saving a company that big will definitely burn a big hole in the govt's pockets. eventually it’s the taxpayers who will suffer.
And if you think that this is where the story ends..... that’s not it. Duopoly also minimizes innovation and research. If you look at one of the biggest and the oldest duopoly in the world i.e. the airline industry, you will notice that it has remained it has not evolved in the past few decades. It used to take 6 hours to fly from Singapore to New Delhi 20 years ago and it still takes the same time.
You surely do not want the same to occur to computers where a new computer chip will run at the same speed as the one 20 years old.
posted by Avyakt at
9:45 am
