con·sol·i·da·tion
Pronunciation: k&n-"sä-l&-'dA-sh&n
2 : the process of uniting : the quality or state of being united; specifically : the unification of two or more corporations by dissolution of existing ones and creation of a single new corporation
As the world grapples with the new realities of a seamless world, there has been a marked change in the way business is carried out. These changes have stemmed from the development of better communication with the advent of the industrial revolution, and has been exaggerated with the digital revolution triggered in the 21st century.
This is an age where boundaries are getting hazier. It does not matter whether one is ensconced in a plush developed country or if one is in a relatively underdeveloped part of the world. The digital age and the modern age has brought a parity in the world that was not present before.
This new environment where 'boundaries' mean nothing has also drastically changed the way business is done. This is the day and age where any Industry would work best if it works 'across boundaries' rather than within them.
The boundaries I am referring to are not necessarily just political boundaries across countries. These could boundaries across locations such as states or cities or even boundaries across different corporate cultures, practices and different ways of working.
Consolidation is the name of the game right now - and we can slowly see many industries waking up to this reality.
Take a look at the changes in the very important steel industry in the last few years. Consolidation in the steel industry began a year back and is now a process which has snowballed into a trend where most of the major steel companies have continued on, by forming mergers and/or through acquisitions. The Software sector has seen a spur of activity primarily due to Google going through a slew of acquisitions, right from YouTube upto DoubleClick.
There has been some consolidation in the Financial sector with merger news from Barclay and ABN Ambro, Nasdaq improving its stake in LSE being the latest such news. The Pharmaceuticals Industry has seen some activity, with some acquisitions by Merk, GSK, Eli Lilly and Pfizer. The acquisition of MedImmune by AstraZeneca is the latest big acquisition in this Industry. The Automobile Industry has been relatively non-affected by the waves of consolidation as of now. But then, pure logic would point to a need of consolidation in this industry - perhaps a tie up between GM and Ford ?
The Consolidations that we have seen until now - may just be the tip of the Iceberg.
Are we going to see a wave of consolidations across all Industries in the future ? Time shall tell.
2 comments:
I dont understand this...consolidation makes companies turn into behemoths...but then we complain abt monopolies as big as those...in india, for example, didnt we have ISP's like VSNL..just one ISP across the country..as soon as more ISP's came in (like mantraonline, satyam etc.), the prices became competitive and the people benefitted from all that. I understand that VSNL wasn't formed out of mergers, but the end result of consolodation is nothing but creating monopolies (as I see it) and monopolies will only lead us to shell more money.
PS: why are you disallowing non-bloggers to comment?
good point !
But it would be incorrect to assume that all consolidations leads to monopolies. Consolidation could mean cross functional companies that need not be monopolies.
We do have corporates like Microsoft that monoplized their domains, but then there are also behemoths like Walmart which brought down costs for the masses.
In the long run monopolies will not work if they do not look after their masses - but consolidation is a different beast. It is more about 'working across borders' than 'monopolizing'
@ Comments: yeah , no particular reason for that :)
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