The Effects of Merger on Competition

Abstract

The paper aims at clarifying the role of merger in influencing the competitive structure in the international market. Therefore, it reveals how merger as expansion strategy plays an important role to decrease and increase competition level in the market. It is indentified that merger leads to change in market share and power of a firm that may lead both negative and positive impact over the competition and related stakeholders. Price fixing, harm of consumer interest, production limitation, entry barriers, suppliers restriction are some negative influences identified in this paper. In addition, developments of innovative products or services, price reduction, operational efficiency etc are some positive influences of merger identified in this paper. From the case study of merger between SmithKline Beecham and Glaxo Wellcome, it is identified that horizontal merger majorly influences the competitive structure of a market. It is identified that although this merger is responsible to emerge worlds leading pharmaceutical company, at the same time, it increases competition that benefits customers in terms of low cost and high quality.