Competitive Strategies and Government Policies Essay

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Competitive Strategies and Government Policies

Merger of Publicis and Omnicom

The mergers are a risky yet profitable venture most companies consider today for the purpose of growth. In the airline industry, two biggest players are considering to merge in order to benefit from the workforce, market and competencies of each other. But the government regulations do not allow easily doing so. There are many hurdles in getting perfect match for merger and then to make it operational. Likewise, Publicis and Omnicom have merged becoming the biggest marketing agency in the world. The merger is global success since Publicis is based in France and Omnicom is an American organization and these companies bring $23 billion revenue and 50% networks of industry at single platform (O'Leary, 2013). These two companies serve companies from different corners of the world. The clients include Coca Cola, Master Card, and Visa. The challenges of the merger include integration of data of the companies, maintaining workforce and making use of complementary skills of the workforce, avoiding cultural conflicts etc. It may involve huge costs as well as require management skills and determination of the top executives (Turner, 2013). The management of the organizations feels that there might be similar events in the industry since the other market players see that the merger of two big companies is so successful that the remaining small companies will not be able to attract big clients. So, this event of the merger of companies can trigger further mergers in the industry that has several advantages as well as disadvantages.

Pricing and Profits

The mergers have several disadvantages for the industry. The merger of big companies result in "too big to fail" companies that are hard to race with. In the free economies and the capitalistic systems, the big players can play the role of a dominant company and may derive other mergers that end up in an industry where there are only a few very big companies which is against the concept of perfect competition (These Are Biggest Client Conflicts Created By The Most Massive Ad Company Merger Ever, 2013).

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Thus, the big clients in financial, airline, information technology, drinks, FMCG and automobile industries will hire the biggest advertising companies which will decline the business of small organizations and advertising agencies. Thus the merged company i.e. Publicis and Omnicom will be able to set and dictate prices in the industry. Also the profits of the industry might concentrate and rest with the big companies.

Type of Merger

The mergers can be horizontal where same level organizations merge or vertical where a company merges with supplier or distributer of conglomerate where different companies form different levels of business combine. Since the advertising industry is mainly service industry and there is very little dependence on raw material, the suppliers have a little role to play as compared to the dominant role of suppliers and distributors in automobile and retail business. Thus this is a horizontal merger in which two companies at same level of business have merged.

Current and expected government policies

The governments in many countries including America and France oppose development of oligopolies and thus demand fulfilling tough criteria as well as pay heavy charges so that the perfect competition is not affected in the market. The companies cannot occupy a much higher share in the market than the sum of two (Perry and Porter, 1985). Besides that, since the merger of two advertising companies is a global example, the governments may be a little more concerned and may tighten the requirements for mergers to prevent monopolizing the industry.

Taxes:

The corporations are taxed at two different levels that is organizational and individual level. The mergers are highly taxed at the time of combining organizational assets.

Global competition

It is quite evident that the impact of….....

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