That's my normal reaction to mergers involving the top companies in any industry. "Synergy" is Business Speak for "monopoly/oligopoly capitalism", which for anyone close to the top of the hill is the biggest and most accessible profit driver around. Outperforming the competition is hard, but given a favorable legislative climate (that is, a modest investment in legislators), a moron could raise profits by buying out the competition and raising prices by 20%.
No actual monopoly is needed; an ordinary oligopoly consisting of friendly, sociable members willing to support a bit of informal price fixing will do just fine. Even a company with just 20% market share can appreciate that the downside of trying to reintroduce true competition into a market may be much larger than the upside if their profits would drop by 75% in the process. Of course, the company could dream of raising its margins to even higher levels later, but a company with just 20% market share cannot normally expect to beat its larger competitors in such a war, while the very biggest companies have to worry about anti-trust laws. Oligopolies aren't as bad as true monopolies, but they are still very different from true competition, and oligopolies are all over the place.
I really think that subverting competition (and responding to competitors' efforts to do the same) is a large part of the modern CEO's job. Do you suppose an oil company CEO is going to save their company a billion dollars by inventing and patenting a new piece to insert into their drilling rigs? They don't have the qualifications. Improving the morale of 10,000 employees is a ridiculously hard task as well, unless someone has made the task much easier by making them miserable to begin with. But what about cooperating with just a few dozen other executives at nominally competing businesses in order to fix prices? What about horizontal and vertical expansion in order to eliminate competition, and throwing corporate weight around to squeeze suppliers, vendors, and legislators? Those are things a CEO is actually qualified to do; those are ways a CEO can make a difference, not in the way the world works but in the corporate bottom line, which is what really matters.
(Side note: corporate profits only matter to the extent they can be converted into personal profits. Enriching oneself at corporate expense is glorious and admirable capitalism on a personal level. For an employee or executive to steal from their employer is only unethical only if it's illegal, and if they are caught.)
What about "better, faster, cheaper"? Better, faster, cheaper killed the calculator market back in the 1970s -- none of the companies that made calculation dirt cheap made any meaningful profits off of it. If you figure out how to make something 90% cheaper, then sooner or later, that knowledge will get out, prices will go down, and in the worst case, the revenues of the entire market will shrink 90%, which is bad business if you owned more than 10% of the market to begin with.
no subject
No actual monopoly is needed; an ordinary oligopoly consisting of friendly, sociable members willing to support a bit of informal price fixing will do just fine. Even a company with just 20% market share can appreciate that the downside of trying to reintroduce true competition into a market may be much larger than the upside if their profits would drop by 75% in the process. Of course, the company could dream of raising its margins to even higher levels later, but a company with just 20% market share cannot normally expect to beat its larger competitors in such a war, while the very biggest companies have to worry about anti-trust laws. Oligopolies aren't as bad as true monopolies, but they are still very different from true competition, and oligopolies are all over the place.
I really think that subverting competition (and responding to competitors' efforts to do the same) is a large part of the modern CEO's job. Do you suppose an oil company CEO is going to save their company a billion dollars by inventing and patenting a new piece to insert into their drilling rigs? They don't have the qualifications. Improving the morale of 10,000 employees is a ridiculously hard task as well, unless someone has made the task much easier by making them miserable to begin with. But what about cooperating with just a few dozen other executives at nominally competing businesses in order to fix prices? What about horizontal and vertical expansion in order to eliminate competition, and throwing corporate weight around to squeeze suppliers, vendors, and legislators? Those are things a CEO is actually qualified to do; those are ways a CEO can make a difference, not in the way the world works but in the corporate bottom line, which is what really matters.
(Side note: corporate profits only matter to the extent they can be converted into personal profits. Enriching oneself at corporate expense is glorious and admirable capitalism on a personal level. For an employee or executive to steal from their employer is only unethical only if it's illegal, and if they are caught.)
What about "better, faster, cheaper"? Better, faster, cheaper killed the calculator market back in the 1970s -- none of the companies that made calculation dirt cheap made any meaningful profits off of it. If you figure out how to make something 90% cheaper, then sooner or later, that knowledge will get out, prices will go down, and in the worst case, the revenues of the entire market will shrink 90%, which is bad business if you owned more than 10% of the market to begin with.