Question

How do megamergers benefit the other companies in the industry? How do megamergers benefit the economy?

Answer 1

Mega mergers can help other companies in the industry as it establishes one big organization which can then lobby with the regulators and government to form favourable policies. Also it can exercise buyer power to drive down prices of raw materials, which can then be used as benchmark by other companies to reduce their cost of production. Also the systems and processes of the most dominant organization can be emulated by other smaller organizations to form a industry standard that lends uniformity and greater efficiency. Also product standards can evolve based on the influence of the dominant player which can then be adopted throughout the industry benefiting other players as well in having a uniform offering.

For the economy, a dominant organization formed by mega merger can be beneficial as it can produce goods and services at greater efficiency thus making optimal utilisation of resources available. Also because of the large size, it is a solid customer to provide credit, so this will help credit growth and open up investment opportunities. Moreover large scale cape programme of the bigger organization can provide employment, investment opportunities and new business opportunities for other players.