Sample Economics Coursework Paper on Merger Analysis: Stanley Black & Deck Company

Merger Analysis: Stanley Black & Deck Company

Stanley Black & Deck Company which was initially called Stanley Works is one of the leading manufacturers of various industrial tools used in the United States. Black and Decker Company was one of the major producers of the industrial tools that were used in the machines and handworks at homes as well. Stanley Works Company, on the other hand, was a major manufacturer of hand tools which indeed made it be on the competitive edge. The merger of the two companies in the year 2010 was a horizontal merger. The two companies shared the same market of manufacturing the industrial tools. It means that they had many related departments with similar ways of operational management. The merger is to beef up the market share and control of the same (Bies, 22). The Net worth of the company is also expected to increase since the assets are coming together as a formidable team. The various industry players have perceived the merger as a threat as it gives the newly formed company a greater competitive advantage hence a high bargaining power in the sales and distribution of its products.

With the merger, it is evident that there are many benefits that they are deemed to get. Firstly is the notion of expansion and control of their market stance. The fact that the headquarters is now situated in Connecticut makes it be centrally placed. The placement makes the distribution channels to be reachable. The fact that it is a horizontal merger assists the company to strengthen the notion of specialization of the products and departments. In this prospect, the firm has specialized into various departments to maximize its production. The company’s principal aim in the merger was to increase its productivity and end the market rivalry in this industry. It is important to note that these businesses were the major industry players.  Their merger would mean that the control of the market would be high and the level of competition would be reduced. Stanley Company, on one hand, had a successful marketing and distribution strategy. On the contrary, the Black and Deck was mainly good at the creation of a high level of management efficiency (Jarrell, 22). The composition of these two companies has recently made the newly formed company to grow exponentially. The growth is attributed to the high level of specialization and the combined effort between the qualified employees from the different divide. As we speak, the company currently has a wide range of department as a result of the merger which is good management. In managerial economics, a merger brings the bright minds together and makes a company be on a high competitive edge. The control of the market indicators is imperative in ensuring that these companies rip the best out of their capital investment.

As the merger took place, the business probable business model that was formed was the monopoly. The two companies were the key industry players in the market of making industrial tools. In a monopolistic market, the industry players dictate the prices. Their monopoly power makes them reduce the advent of competition. The control of the market is very detrimental to the ordinary consumer since the decision on what to sell and who to sell to is solely depended on the merged company.  The less level of competition connotes a reduction in the quality of the company products. Currently the company has divested into various department which has helped it to differentiate its products. One of the agencies business segment brands which is differentiated into industrial tools production, the security tools, the divested businesses and the construction and do-it-yourself. This kind of framework is only possible with high capital and proficient human resource (Rhoades, 33). The merger has made it possible for the professional experts from the two divides to come together and form a formidable company that does not only be on the competitive edge but also attains a high level of market share.

In the recent past, the company had to deal with the antitrust bodies that were on the opposing end of the merger. Even as the alliance came into play, it is the expectation of these agencies that it will not only bring the level of competition to go down but it will also provide grounds for manufacture of low quality goods. The possible merger would bring on board the advent of price fixing. Here the newly formed company would collude with other industry players to fix price at certain levels which would eventually bring the notion of economic burden to the final consumers of these goods. Additionally this body saw a possible discrimination of the rights where some parts of the country would have more of these goods while other won’t have (Brown and Eric, 12).

With the control of all the distribution channels, Stanley Black and Decker Company have the control of supply of various parts of the country. This power is also tied to the fact that their manufacturing stance in now unified and therefore they can monitor the amount of stock in the market.  The playing with the demand and supply of goods and services in the market, poses a threat of diminishing economy. The antitrust body allowed the merger on the account that they would not enter into a possible control of the forces of demand and supplies. Instead the company would ensure that it protects the consumers from unscrupulous retailers who want to hike prices of these commodities. Additionally, the merger would not affect the market share of other industry players since the government as the regulator has placed measures that dies not only protect the consumer but also gives the young upcoming firms a competitive advantage over the bigger companies. The market entry for example is quite easy as the regulations have been made less tight by the antitrust laws.  Additionally, the more prominent companies are charged with the mandate of growing the smaller firms.  With this arrangement in place, the harmful effects of monopoly caused by the merger will not be felt. 

In a nutshell, the merger between the two formidable companies brings on board the advent of monopolistic market.  They are the major players in this industry and this would mean that they can control the forces of demand and supply and therefore the notion of prices.  The breach of the antitrust laws on price fixation was a probable occurrence for this newly formed company (Heinicke, 223). It would therefore lead the imposition of economic burden to the final consumers as depicted by the dad weight loss in the monopoly curve. The merger has brought growth in terms of profits to the company. Additionally, there is high operational efficiency due to highly professional human resource. The regulations put by the antitrust laws has made the company to operate efficiently without killing others firms or creating a burden to the consumers.  

Works cited

Bies, Sylvester W. “Retractable blade knife.” U.S. Patent No. 4,233,734. 18 Nov. 2010.

Browne, Lynn E., and Eric S. Rosengren. “The merger boom: an overview.” Conference Series;[Proceedings]. Vol. 31. Federal Reserve Bank of Boston, 2014.

Caves, Richard E. “Effects of mergers and acquisitions on the economy: an industrial organization perspective.” The Merger Boom, Federal Reserve Bank of Boston, Boston, MA (2007): 149-168.

Heinick, Rick. “Overcoming Merger Risks.” Retrieved October 4 (2010): 2011.

Jarrell, Gregg A. “Financial innovation and corporate mergers.” Conference Series;[Proceedings]. Vol. 31. Federal Reserve Bank of Boston, 2014.

Moerland, Pieter W. “Efficacy and freedom of mergers and acquisitions.” Competition in Europe. Springer Netherlands, 2011. 115-133.

Rhoades, Stephen. “The Effect of Diversification on Industry Profitability in 241 Manufacturing Industries.” Review of Economics and Statistics 55 (2014): 146-55.

 Smith, Preston G., and Donald G. Reinertsen. Developing products in half the time: new rules, new tools. New York, NY: Van Nostrand Reinhold, 1998.