Prove why this merger would be beneficial for the company Essay

Prove why this merger would be beneficial for the company - Essay Example Thus, a company that merges with a competing firm will benefit from economies of scale, market penetration, and diversification. When the two firms come together to form a single firm, the output increases and the average costs reduce. Budgets for activities such as marketing might be lowered. The new company enjoys increased purchasing power, leading to lowering of the costs of raw materials and other things. Consumers, therefore, enjoy the reduced prices due to the reduced costs. One of the different economies of scale that the merger will bring includes the bulk buying: the merged company will enjoy discounts that come with purchasing large quantities of raw materials. The company will also enjoy a better rate of interest and hence boost its financial position. Additionally, the company will enjoy from technical economies especially if the firm has significant fixed costs since the average costs reduce. Furthermore, the merger will reduce organizational costs since they will merge their operational officer (Tejvan, 2014). The companies will quickly access more customers than before since they have merged their marketing, sales and distribution efforts. If the individual firms had demonstrated success in separate markets, the merger would benefit greatly. For instance, the merger of American automaker Chrysler Corp. and the German automaker Daimler-Benz enabled the new firm, Daimler-Benz, to penetrate markets in both North America and Europe. If both companies competed initially in the same market, they might fail to enjoy the benefit of market penetration since the customers will still see them as separate (Reddy, 2011). Thus, merging of companies that operated in various geographic markets may be more beneficial than those that worked in the same market. Merging allows companies to either combine or start producing a variety of goods and services. Businesses that produce the same products or offer similar