Oligopolies and Monopolistic Competition

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McCormick & Company is a global company that is involved in manufacturing, marketing, as well as distribution of spices over the entire world. Also inclusive in their customer base is the retailing outlets, food production industry and organizations involved in food production.

Their scope ranges from North America and Europe. However, they also have additional services that offer their products to parts of Asia, Central America and southern Africa. The company has two segments that it operates with; the consumer segment and industrial segment.

The consumer segment is involved in selling its products while the industrial segment is involved in the production. The annual sale was about $345 million in year 2010. It is also notable that the sales are expected to increase to about 5% to 7% in year 2010 (Zacks Investment Research, 2007).

On the other hand, Unilever company is a double listed company in both the United Kingdom and Netherlands. It is also notable that both companies operate under the same directors and as a single business organization.

The scope of operation of the company ranges in different fields such as skin care, hair care products and food brands. Being involved in this came about due to their action of acquiring various organizations involved in different fields. Annuals sales revenue in 2010 was $44,262 million.

The two organizations used to control markets in different regions of the world. The action of consolidation therefore widens the market base that the two organizations had, as there are increased resources for expansion due to the knowledge of different areas each of them controlled (Bofah, 1998).

In turn, the revenue generated from the sales is likely to reduce due to the fact that only a single management body would be in existence as other managers that may be there are distributed to serve other purposes.

The synergy approach tends to be beneficial to the organization as there is a revenue enhancement as well as savings in the cost of production (Guthrie, 2000). Enjoyment and enhancement of the food sector, which both these organizations are involved in is also possible.

The revenue that was being realized by McCormick would also increase due to the fact that they would have lesser competition. In turn, even an increase in the price by McCormick would not automatically mean that they would lose sales.

The incentive of developing new products would also reduce as competition reduces, which may be seen as detrimental to the consumers. Control of the market, which is usually the dream of every organization will also take place as the combined contribution of these two organization accounts for about 80% of all the sales in the United States (Katz, 2008).

The acquisition would involve Unilever brands; Lawry and Adolph, McCormick and Morton Inc. It is however notable that the two companies that would be involved in the acquisition is McCormick and Unilever.

Morton was only meant to feature in the bid to ensure that there exist the needed competition in the market to ensure minimum exploitation of the customers in the market. Both McCormick and Unilever are involved in seasoned foods and are major competitors in the market (Katz, 2008).

On the other hand, Morton deals with salty products and was meant to improve the competition that would have been lost.

Attempts of merger between organizations are meant to reduce competition and increase control of the market. Success of the above mentioned merger would mean that the public is denied the chance to enjoy cheaper prices as well as variety of products, as there is creation of an oligopolistic system (Krugman, 2007). Such is not welcome as it only benefits the organization and not the people in general.

References

Bofah, K. (1998). What Is Industry Consolidation? Web.

Guthrie, C. (2000). The Benefits of Server Consolidation for Utilities Infrastructure. Web.

Katz, M. J. (2008). McCormick Required to Sell its Season-All Seasoned Salt Business to Morton, Inc.FTC Challenges McCormicks Acquisition of Unilevers Lawrys and Adolphs Brands. Web.

Krugman, P. (2007). Economics 2. Worth: Wells Publication.

Zacks Investment Research,. (2011). Growth & Income Stock: McCormick & Co, Inc. Web.

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Oligopolies and Monopolistic Competition

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