Question

Instead of entering into an alliance or partnership, a wireless company, Verizon Wireless opts to merge with a web services company, Yahoo! What are the reasons for preferring a merger to an alliance or partnership? Explain the other organizational mechanisms that are also preferable to alliances.

Answer 1

Verizon decided to merge with Yahoo instead of getting into an alliance or partnership because merger because Verizon decided that it would gain economies of scale and become more profitable with merger and also help the merged entity gain more market share which could not be achieved through alliance or partnership. The company wanted to have a better market share and have edge over the competitors as compared to other companies and hence the management decided that it can be done through merger only.

Other organizational mechanisms that are also preferable alliances are:

1. Acquisition: Acquisition is the strategy by which one company acquires the other company and gains it's resources, manpower, systems etc under its own umbrella and hence becomes more competitive in the market among it's competitors.

2. Partnership: Partnership means that both the companies share their resources with each other and also share the common gains and revenues with each other due to mutual trust between them.

3. Alliance: Alliance is also a form of partnership only but the difference between alliance and partnerships is that alliance is a collaboration between sovereign interests of both the organizations for mutual profits whereas partnership is a collaboration between individual interests of both partners for mutual profits.