Oligopoly
- Submitted by: rpdshield167
- Views: 519
- Category: Politics: Economics
- Date Submitted: 11/21/2010 03:28 PM
- Pages: 2
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What are the advantages of relationship enterprises over mergers?
The relationship enterprise is a network of independent firms that form alliances that in essence the companies to provide goods and services and operate as a single company in selected key areas. It is consolidation without huge investment, battles over ownership, post-merger headaches and regrets. The investment dollars can go into building market positions, new products, capacity and capabilities for the enterprise rather than for shares of an acquired company. The relationship enterprise is a natural evolution, a consequence of the political and economic forces in the business environment. For example, I travel at least once per month from New York to Columbus, Ohio. I always book my ticket online with a major airline but fly on a commuter airline to my destination. My last ticket was purchased on Continental and ExpressJet operated the flight. Continental serviced all other aspects of my trip.
Consolidation on a global scale is very expensive, and often the global corporation must make major compromises in the selection of acquisition partners because of cost or national restrictions (e.g., on making purchases in the airline, military and oil industries). The relationship enterprise slides by these limitations and goes directly to the best in any country with an offer to form an alliance with its desired product; no size problems, no national restrictions, no anti-trust problems, no funding limitations, just a strong relationship with the best company.
This evolution is a natural product of industrial globalization, information and communication advancements as well geopolitical issues that make this option appealing. Companies can benefit from the economies of scale and the scope of consolidation without the baggage and limitations of acquisitions and mergers.
The relationship enterprise is a network of independent firms that form alliances that in essence the companies to provide goods and services and operate as a single company in selected key areas. It is consolidation without huge investment, battles over ownership, post-merger headaches and regrets. The investment dollars can go into building market positions, new products, capacity and capabilities for the enterprise rather than for shares of an acquired company. The relationship enterprise is a natural evolution, a consequence of the political and economic forces in the business environment. For example, I travel at least once per month from New York to Columbus, Ohio. I always book my ticket online with a major airline but fly on a commuter airline to my destination. My last ticket was purchased on Continental and ExpressJet operated the flight. Continental serviced all other aspects of my trip.
Consolidation on a global scale is very expensive, and often the global corporation must make major compromises in the selection of acquisition partners because of cost or national restrictions (e.g., on making purchases in the airline, military and oil industries). The relationship enterprise slides by these limitations and goes directly to the best in any country with an offer to form an alliance with its desired product; no size problems, no national restrictions, no anti-trust problems, no funding limitations, just a strong relationship with the best company.
This evolution is a natural product of industrial globalization, information and communication advancements as well geopolitical issues that make this option appealing. Companies can benefit from the economies of scale and the scope of consolidation without the baggage and limitations of acquisitions and mergers.