Time Warner: Case Study 1. From the assignment 1, we identified that a merger is the one and only option for the expansion of Time Warner. However, the industry is heavily confronted with government regulations that oversee the merger…
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Such a situation may progressively lead to market monopoly. It is obvious that a monopolistic market environment may hurt the interests of buyers, suppliers, and new market entrants. Sometimes, mergers adversely affect the feasibility of integrated organizations also if the business becomes too large because of the merger. Under such circumstances, the merger process may cause the firms to incur higher unit costs. Similarly, often huge mergers result in employee termination, which in turn, would contribute to growing unemployment issues. In short, thoughtless mergers would threaten the economic uplift of the country and, therefore, government regulation is essential in a market economy. 2. It is observed that the US government has constantly intervened in the country’s market process over the last decade, especially after the 2008-09 global financial crisis. The US government identified that accounting fraud was the root cause behind a series of corporate failures in the country. Hence, nowadays the US government greatly intervenes in the country’s market process on the belief that those restrictions would put a check on illegal and unfair business practices. In addition, the US debt crisis also persuaded regulators to exercise more control over the country’s market process. ...
As Perry and Dell (2010) pointed out, investigations discovered that the US bank collapses were partially attributable to inefficient government control over its market operations. Policymakers believe that government intervention in the market process would assist the country to overcome the impacts of debt crisis and, thereby, promote sustainable economic growth. 3. An organization or an industry would face some additional complexities if it needs to expand its business sector by means of capital projects rather than merger strategy. Acquisition strategy is an alternative to merger and this method demands huge amounts of money. If the Time Warner proceeds with the acquisition strategy, the firm would be forced to raise huge capital in order to acquire another firm. In addition, organizational change associated with the acquisition strategy may sometimes raise potential managerial challenges to the organization. New venture expansion is another strategy for self expansion and it requires the firm to raise abundant potential sources of capital. In case of large venture projects, Time Warner alone cannot fund its operational requirements and, thus, the firm may be forced to depend on debt financing practices. However, such policies would adversely affect the financial viability of the firm and consequently threaten the long-term sustainability of the organization (Debt financing). Furthermore, other capital projects based on self-expansional strategies may raise a series of operational difficulties to the company while entering an overseas market. It has been identified that the level of uncertainty is higher under self-expansion strategies based on capital projects other than merger process. 4. When the industry is confronted with government
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