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Assess the likely impact on a business such as Pfizer, of a global merger with a business such as Allergan - Edexcel - A-Level Business - Question 2 - 2017 - Paper 1
Question 2
Assess the likely impact on a business such as Pfizer, of a global merger with a business such as Allergan. Extract E Pfizer merges with Allergan In 2015, American... show full transcript
Worked Solution & Example Answer:Assess the likely impact on a business such as Pfizer, of a global merger with a business such as Allergan - Edexcel - A-Level Business - Question 2 - 2017 - Paper 1
Step 1
Global merger impact on Pfizer
Answer
A global merger between Pfizer and Allergan can enhance Pfizer's market position significantly. Firstly, by merging with Allergan, Pfizer unlocks new markets due to Allergan's existing customer base and product offerings, such as Botox and other specialized drugs. This could lead to increased sales and revenue for the combined entity. Secondly, shifting the headquarters to Ireland offers substantial corporate tax benefits, as Ireland's tax rates are considerably lower than those in the USA, which can boost profitability.
Furthermore, the merger allows Pfizer to take advantage of the EU market, facilitating trade without the usual tariff barriers. This positions Pfizer to expand its reach both within Europe and globally, optimizing supply chain efficiency and market accessibility. However, the merger also raises concerns about job losses, as it may lead to redundancies due to overlapping roles, especially given that the scope of employment changes is not yet clarified.
Step 2
Challenges and counterbalances
Answer
Despite the advantages, the merger has potential downsides. One critical challenge is the integration of Allergan into Pfizer’s corporate culture, which may lead to conflicts if there are differing management styles and operational objectives between the two companies. Additionally, there are human resource implications that can arise, such as potential layoffs and employee morale issues.
Allergan's established market presence and expertise in certain areas, like cosmetic products, may also require substantial research to synergize operations effectively. Furthermore, there exists a long-term reputational risk for Pfizer, particularly if the merger is perceived as primarily tax-driven rather than focused on creating value in pharmaceutical innovation and product development.
Step 3
Long-term implications
Answer
In the long term, the merger could either bolster Pfizer's global competitiveness or pose difficulties in sustaining management effectiveness. The need for strategic alignment and coherent operational integration is essential to manage the new business efficiently. In conclusion, while the merger presents an opportunity for immediate gains, careful consideration of managerial capabilities, market dynamics, and stakeholder perceptions will determine its ultimate success.