It Is Claimed That 40% of Mergers and Joint Ventures Fail. Discuss with Reasons the Above Issue.

This essay will identify the pros and cons that organisations face when joining together to form joint ventures or when merging. The essay will explain the different types of mergers and the main reasons that cause the 40% fail in most mergers and joint ventures. Also the essay will highlight the importance of embracing the new global world and in the process embracing the spectrum of cultures faced not just in the world but within every organisation.

A merger is defined as the “union of two or more commercial interests or corporations. Mergers are known to be an aggressive stance to lessen competition. In other words, a merger can be made between two companies in order to destroy competition in their market or to devour competition in two different markets all together, which in turn, can lead to higher prices, reduced availability of goods or services, lower quality of products, and less innovation. Some mergers create a rigorous market, while others produce a single firm to raise prices.

In a concentrated market, only a few firms stand. But, there is a great danger as the firms may find it easier to lessen competition by merging. For example, they may agree on the prices they will charge consumers. There are many disadvantages to the community if the merger not only destroys its closest competition, but if the remaining firms in the market do not prove to be a substantial competition, there can be a great cause of concern.

There are three different types of mergers, horizontal mergers, which involve two competitors; vertical mergers, which involve firms in a buyer-seller relationship; and potential competition -- or conglomerate mergers -- in which a new firms is likely to enter the market and become a potential competitor of the initial market’s firms.

A horizontal merger is when two or more companies with similar product lines join together. The elimination of head-to-head competition between two leading firms may result in anticompetitive effects. This happens when the merged firm starts to dramatically increase prices in its product forcing the consumers to buy products at a very expensive rate. This anticompetitive effect can be witnessed in the recent attempt by Staples, Inc., a "superstore" retailer of office supplies, to acquire Office Depot, another enormous retailer of office supplies. In many areas of the country, the merger would have reduced the number of superstore competitors, leaving Staples as the only superstore in the area. The companies’ pricing data showed evidence that Staples would have been able to raise prices by13 percent after the merger. The merger was not concluded, but its downfall saved consumers an estimated $1.1 billion, which would have resulted over the next five years.

A vertical merger happens between the vender and the consumer, allowing firms to interact greatly in a buyer-seller relationship. A manufacturer merging with the distributor of its products can be identified as a vertical merger. A vertical merger can harm competition by making it difficult for competitors to gain access to an important component product or to an important channel of distribution. This is called a "vertical foreclosure" or "bottleneck" problem. The example of the merger of Time Warner, Inc., producers of HBO and other video programming, and Turner Corp., producers of CNN, TBS, and other programming. Concerns that Time Warner could refuse to sell popular video programming to competitors of cable TV companies of Time Warner or Turner were expressed, also there were concerns that even if the company would still sell its products to its competitors, whether the products would be sold at discriminatory rates. There were many questions about the merger, especially if its existence would allow Time Warner-Tuner affiliate cable companies to maintain monopolies against competitors like Direct Broadcast Satellite and new wireless cable technologies. Furthermore, the Time Warner-Turner affiliates could hurt competition in the production of video programming by refusing to carry programming produced by competitors of both Time Warner and Turner.

A joint venture is a legal organisation that takes the form of a “partnership in which the persons jointly undertake a transaction for mutual profit”. Generally each person contributes assets and share risks. Joint ventures, like to a partnership, can involve any type of business transaction and the "persons" involved can be individuals, groups of individuals, companies, or corporations.

Joint ventures are used widely by companies to gain entrance into foreign markets. Foreign companies form joint ventures with domestic companies already present in markets the foreign companies would like to enter. But the foreign companies are greatly advantages as they generally bring new technologies and business practices into the joint venture,