Office Max and Office Depot Merges (Case Study Sample)

OfficeMax and Office Depot Mergers
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Abstract
A merger is where two firms come together and combine their operations on equal basis so that they share their resources and capabilities while trying to achieve strong competitive advantage. Some of the aims that companies strive to attain while merging include increased market share, higher profits volume and reduction of competition. An example is a merger between OfficeMax and Office Depot which was approved by the federal trade commission in February 2013.This paper will discuss the impact of this merger to the industry in relation to competition. It will also analyse the effect of the merger on consumers and to the society. Also, it will discuss how the merging has benefited both firms in relation to customer service, competition and profits.
OfficeMax is an American retailer which deals with office supplies, furniture and school essentials. It also provides a variety of services including mailing and shipping. It is a subsidiary of Office Depot Company. The company serves customers across 57 countries with more than 1500 retail stores globally. In 2012, net sales were about $6.9 billion. In November 2013 the company together with Office Depot was approved by the Federal Trade Union to form a merger; creating the largest office-supplies chain in the U.S. Merging would help them to be able to counter their biggest competitor, Staples Company. The mergers have laid out strategy to cut costs, expand sales and reengineer their value.
Impact of merging OfficeMax and office depot
Mergers often lead to lower procurement costs for the combined entity. The mergers will now charge lower prices for the products due to production efficiency. Merging will also help these companies to increase the variety they offer to customers. It will also help to enhance the quality of the office furniture and the services they offer. The reason is because there will be sharing of technology and facilities and research capabilities will be enhanced so as to help conform to customer needs. Mergers also bring some negative effects. This is because of change of duties and this leads to confusion, errors which leads to unhappy customers. OfficeMax and Office Depot will also benefit from merging through economies of scale. This will be due to increased output hence reducing average costs. Merging the companies will help them share risks. This is especially during the development of a new product. Product fails cause significant losses to the company which may be hard to compensate. Merging will help the companies to diversify in terms of market share or through introduction of a new product line.
Reasons for and against these mergers
Mergers can be very helpful because they help a company to grow. This is especially for small firms which are facing many challenges in their efforts to try and cope with the tough competition outside. OfficeMax and Office Depot have now a chance of investing in new opportunities as they have shared the risk. These firms deal with almost similar product lines and hence product duplication can happen if they do not merge. The firms will also assist each other in sharing of facilities; skilled staff and technology so as to enable them develop quality products. Also, they are able to minimise costs thus the price of their final goods will be lowered. This creates production efficiency and is a major contributor to the company profits. The merging firms also gain access to a larger pool of capital and it may be easier for them to acquire loan from banks and other financial institutions. The firms also gain access to new markets e.g. OfficeMax could gain easy access to a market where Office Depot had already establishe...