Interviewing on Economic Decisions - Essay Example

?ECONOMIC DECISION INTERVIEW Day in and out, people make several economic decisions. Whereas some of these decisions are as huge as acquiring an international companies, some of them are as little as deciding how much money to spend in a day. But however small or large an economic decision is, it must be taken with several factors in mind. Without these factors, it is likely one may regret of decisions taken in the long run. In order to identify some common factors people put in place in their economic decisions, the writer interviewed someone on one of his economic decisions. Among other things, the interview was to discover the expectations of the person in taking the decision and how well or bad the decision has worked out. The interview was taken with the aid of an interview guide and it has been analyzed qualitatively. The decision taken by the person, who would be referred to as economist was a decision to merge his small printing business with a cyber cafe. There were two major factors that influenced the decision for a merger. In the first place, the economist had the realization that most people who use the internet cafe also patronize printing and other secretarial services such as scanning, photocopying, lamination and binding; all of which he offered in his firm. He therefore wanted to extend these services to the users of the internet cafe. To him, joining the internet cafe was a way to increase the number of services he offered. The other reason that influenced the decision was the fact that the economist realized that the size of his business was small and needed to expand. However, he wanted this to happen within a very short time. According to Joel (2011) “The main purpose of many mergers is to produce a synergistic effect in a much shorter time than would be possible through a gradual growth, if it would otherwise be possible at all.” This is to say that the decision for merger ensures an outright growth of a company from a single state to a double state. This growth is sudden rather than gradual. What is more, merger was less cost involving compared to decision to start a new internet cafe from the scratch. Whiles deciding to merge his company, there were three prime expectations of the economist. In the first place, he had an expectation of reviving his company, which was declining in growth. According to him, this was partly because there had been the establishment of several printing businesses in the area where he operated from. The opening of the new printing firms caused serious competition. He explained that there became several options for customers and that though he continued to serve his customers well, some of the customers wanted to make good use of the new businesses with reasons such as avoiding delays at his end because he had to serve many people when there were other firms that were empty. Again, he had a realization that most of the people who entered his firm came with an expectation to have internet service so that they could print from the internet. Such people who did not find the internet service in place went to other places where they could have both internet and printing services. It was therefore his expectation that with the merger, his firm would grow because all the people who came to his firm and left because there was no internet service would now do business with him. As a follow up to his first expectation, he felt that expanding his business would increase the number of customers he had. This was because he would have his regular customers and the customers of the internet cafe all on his side. Again, he would have an increase in the number of customers he served because the firm would now be in position to offer wide range of services. Naturally, by serving many customers at a time, he was sure his profit would increase. Lastly, the decision was taken in order to have a supporting partner to aid with the managerial and financial affairs of the company. According to the economist, his firm was a sole proprietorship company and that having access to financial support such as loans were difficult for him. To this end, he was expecting that he would the company would now be in a position to acquire financial services. Again with two people running the company, he was sure the other partner would be in a position to give support if there was not in that position at any point in time. Also, he highlighted the fact that he believes that two heads are better than one and so with a co-owner, they could have more formidable and comprehensive decisions as to how to run the company. According to the economist, the prime reason for choosing merger instead of other alternatives like acquisition and setting up a new company was appealing to him because it was cheaper to do. According to him, he did not need any huge capital to merge his printing company with the internet cafe. All he needed was to go through due legal processes and start operation as a combined owner of the new ‘two-in-one’ company. The economist explained that he had been in his business for only two years and had not been able to raise enough capital to acquire the internet cafe outright. In his regard, since he needed the growth of his company badly, he saw merger as the best and only option available for him. Again, this decision was appealing to him because unlike a decision to start a new business, merger was a guaranteed way of ensuring sudden growth of his company. To him, it was like ‘breaking down the temple of Jerusalem and raising it up in only three days’. The customer recounted the difficulty he had been through in the past two years and said that it could have taken him almost fifteen years to see his business growth as big as the new two-in-one business. Since making the decision, has he/she acquired other information that would have changed the decision Though the economist recounted several benefits he had derived from the decision of merger, he admitted that finding a means to raise capital to acquire the internet cafe rather than merging would have been the best. He said this conclusion was reached by gathering personal information from the new merged company. The information was based on the profit that the new company earns. He lamented that if he had waited till having enough money to acquire the interne cafe he would have been entitled to all the profits and could have make up for the payment of the capital at a very fast rate. The whole idea of merger was therefore something he would have changed he had the opportunity to. Comparing the profits he would have had even if he borrowed to acquire the business, he draws the line of opportunity cost between the merger and acquisition saying the benefit of acquisition would have been long term but highly useful. REFERENCE LIST Joel R. “Factors to Consider before Saying 'Yes' to a Merger” http://www.law.com/jsp/law/sfb/lawArticleSFB.jsp?id=1202426727000 Small Firm Business. 2011. Web. 8th March 2011 Read More