Mergers & it's Development:Case of Amazon's Acquisition of Whole Foods (Essay Sample)

ESSAY
ECONOMICS
ASSESSMENT OF MERGERS AND ITS DEVELOPMENTS: CASE OF AMAZON’S ACQUISITION OF WHOLE FOODS
STUDENT NAME:
STUDENT ID:
DATE:
INTRODUCTION
Mergers have been a step for many firms to expanding their operations. Mergers and acquisitions have been seen as consolidation of companies. A merger occurs when two firms combine to form one company. In most cases both firms have controlling power and the major issues is usually in bringing the policies of each to control (Nadar, 2018).
For my paper, I will be closely analysing Amazon and whole foods business models, which will then lead to the reason behind this mergers and acquisitions deal and why this deal is beneficial for both two brands. Lastly, I will be examining the current operations of these two brands and measure success of the merger based on the impact it has had on customers and the industry.
The essay will seek to answer several questions including;
1 What motivated the merger between the two companies
2 What were the benefits and costs of the merger
3 Was the merger successful?
4 What effect did the merge have on consumers and industry
Outline
* Evaluating Amazon's business model and identify their strengths and weaknesses
* Evaluating Whole Foods’ business model and identify their strength and weaknesses
* Reveal why the combination of the two mutualizes their weaknesses and maximize their potential growth
* Address aftereffect of this merger case and how it affects consumers and industry
BODY
Incentive for the merge
Amazon was sensitized to the merger due to the benefit it opted to leap. The fact that Whole foods specialises in natural products, and makes use of a differentiation strategy, would be of help to Amazon which focus on mass marketing. Whole foods on the other hand would benefit from the high online capabilities possessed by Amazon. However, the deal is cost intensive. For instance Amazon had to invest $13.7 billion for the merger (White, 2020). The two wold benefit from economies of scale as they optimise on each strengths. In addition, it limits duplication of monopoly, and help firms invest more in research and development.
Amazon business model
As of today, Amazon is known as one of the big four tech companies in America. Founded in 1995 and its emphasis on growth and expansion instead of profitability has helped Amazon declare its dominance in the competitive e-commerce market. As of 2018, “Amazon is set to clear $258.22 billion in US retail sales in 2018, according to eMarketer’s figures, which will work out to 49.1 percent of all online retail spend in the country, and 5 percent of all retail sales” (Lunden, 2018). The firm has had to deal with stiff competition from the market. Its major competitors are as shown on the figure below, with amazon being the lead occupying about 44% of the market (Baskin and Jessica, 2018).
Thus to face the stiff competition, the firm has gone out to mergers and acquisitions that would help it improve on its strategy structure. Below is a competitor analysis for the firm
Competitor analysis
Competitive factor

Amazon

Strengths

Weaknesses

Competitor A (Alibaba)
S W

Competitor B(Naspers)
S W

Importance to customer

Products

Media products, apparels, electronics, beauty, and customer specific equipment’s

Tap the large market unserved

high risk due to the wide spectrum of product coverage

*

*

4

Price

Individual seller will pay $0.99 and additional variable fee of $0.45

Low price hence more attractive

Low contribution

*

*

3

Quality

High quality service

Uniqueness

High risky

*

*

4

Selection

Multi-product line

High differentiation

High risky

*

*

2

Location

Worldwide with major foundation in (USA)

High market

Little customers attention

*

*

2

Appearance

Unique and fashionable strategy

Use by people of all lines

Hard to maximize for all users

*

*

4

Sales method

Online

Reach to a wide customer market

Increased customer waiting

*

*

2

Credit policy

special financing and instalments

Maintenance of quality customers

Increased bad debts

*

*

3

Advertising

Online, social media, TV, radio

Communication to target market

High costs

*

*

4

Image

Service and products for all ages and gender

High customer satisfaction

High cost

*

*

2

Service

Online

Reach out to target market

hard to convince without the product at hand

*

*

1

Reliability

Excellent

High customer satisfaction

May not meet expectation

*

*

2

Stability

Active year round

Serve a wide market

High cost

*

*

3

Expertise

Specialisation

Increased efficiency

High cost

*

*

2

Reputation

First mover

Dominance and high returns

High risk

*

*

3

The model as presented in the canvase shos that the firm major consentration has been on cost leadership.
Competitive strategy of Amazon depict a firm that is a cost leaders, and is having a high differentiation focus.
Whole food business model
Whole foods has been leaping on the competitive edge strategy of providing its customers with organic and natural foods. It has thus invested heavily on customer’s satisfaction though provision of high quality services and products. As shown on the figure below, the firm has ensured they are able to have cost leadership, as well as high differentiation to ensure they leap most from its market segment. The firms occupies about 11% of the market share (Grilo, 2019). Combination of the two models
The two companies coming together has been a benefit for both. For instance wholefoods has not only grown, but has benefited from the acquisition as it has been able to expand, and improve its online capabilities. It has also been able to develop in line with its discount and prime branding. This has an impact on the customers which has led to improved customers satisfaction. The waiting time for customers ordering the groceries has reduced and thus they have been able to improve on customer service.
Having the two brough together, it is important to realise that Amazon consentration is on cost leadership whicle whole foods focuses on diffrentiaon. This is a major streaght to the merger as a combination of these unique competitve advantage strategies would help them become market leadser (Grilo, 2019).
The merge will be a success as it will be able to differentiate its products, and ensure minimal cost, which will offer them a competitive advantage. They will also be able to target mass market as well as niche markets, which will be an advantage to the merge and they will increase the customer base.
However, it is important to notice that the merge will also be faced with a lot of challenges. In line with the high competition from Walmart, Kroger’s, and Target, the firm will have to optimise on its strengths and opportunities.
Impact on the industry
As successful as Amazon is, its 13.7 billion dollar acquisition ...