Revision To Discussion 1 Week 8 – Assignment Example

Discussion Week 8: Mergers al Affiliation Discussion Week 8: Mergers a) What is a merger and how is it different from ajoint-venture as an expansion business strategy?
Merger is an expansion strategy where two organizations decide to become one. In contrast, a joint venture means “two companies conspire to achieve a specific goal, such as building a third company, working on an outside project or marketing synergistic services. In a joint venture, both companies remain separate and intact” (Duff par. 1).
b) What are the main economic ramifications from entering into a merger? Discuss this from the standpoints of business firms involved as well as the impacts on consumers.
Organizations entering into a merger were revealed to generate the following benefits: (1) fixed cost savings; (2) generation of “q-related incentives, i.e., the productivity of the acquired resources may increase following acquisition, generating surplus and an incentive for firms of differing productivities to transact” (David 27); and (3) availing of either synergies or complementarities, where the infusion of resources of both organizations enable greater advantages through the sum of their parts (David). For consumers, mergers enable generation of greater perceived value from the improved products and services offered by the merged organizations. Merged organizations provide enhanced core competencies that are offered to the consumers.
c) Discuss some of the economic criteria that the Justice Department and FTC use in approving or rejecting an application for a merger.
The paramount economic criterion that the Justice Department and the FTC use in approving an application for a merger is the adherence to the U.S. antitrust law: “to prevent anticompetitive mergers or acquisitions. Under the Hart-Scott-Rodino Act, the FTC and the Department of Justice review most of the proposed transactions that affect commerce in the United States and are over a certain size, and either agency can take legal action to block deals that it believes would “substantially lessen competition” (FTC par. 1). As such, any merger that is seen to jeopardize free competition in the industry would be rejected accordingly.
References
David, J.M. "The Aggregate Implications of Mergers and Acquisitions." 7 November 2011. laef.ucsb.edu. 20 November 2014 .
Duff, V. "A Difference Between Mergers and Joint Ventures." n.d. azcentral.com. 26 November 2014 .
FTC. "Merger Review." n.d. ftc.gov. 26 November 2014 .