Long Term Investment Decisions

Abstract

The main purpose of the research paper is to explore the government regulations, their need and the why they are needed during the process of mergers and acquisitions. The industry selected is the Computer and Information Technology Industry and I have chosen Dell under it. The scenario that I used if that Dell wants to expand and what are the possible complexities and regulation it may face while doing so.

Abstractii

Introduction1

Discussion1

Need of Government Regulations1

Rationale for Government Intervention2

Additional Complexities of Self Expansion3

Impact on Profitability of Interests of Stockholder and Managers4

Conclusion5

References6

Long Term Investment Decisions

Introduction

In my previous assignment I choose the company Dell. Dell is ranked as the second best company in terms of computer hardware design, manufacturing and distribution. The company now wants to expand in its industry and become the market leader. There are various laws and regulations by the United States Government when it comes to mergers and expansion. These laws are primarily to maintain and protect the interests of all the groups and the individuals that are present in the industry and that would be somehow affected by the merger or acquisition of two or more companies. Dell also faces some government regulation is terms of the expansion. A thorough analysis in this regard is given below for your perusal.

Discussion

Need of Government Regulations

In competitive free markets capitalism is ethical because of few reasons. First it helps achieve utilitarian goals, second it protects the right of the buyer and the seller and third that it results in fair distribution of costs and benefits. These advantages mostly depend on competition in the market economy. A healthy competition in the market leads to advantage for both all the individuals involved. But mergers and expansions by companies can give considerable threat to this competition in terms of monopoly, oligopoly and anti competitive practices. This is where government regulation is needed during corporate expansions to safeguard certain small individuals or companies, the buyers and the sellers from these threats.

Monopoly leads to hundred percent market share by the company who mergers or acquires other small companies in the industry. This market share then gives the company the power to affect the prices of the products it sells resulting in higher profits which is injustice to the consumers. Also these companies then make entry in to the industry by new entrants very difficult that is the barriers to entry will be really high for any other small company looking to come in the same industry if Dell holds a monopoly in the market.

Oligopoly may not apply very much to Dell since it's a large company itself but if it decides to merge with a number of small sellers this will create problem for other medium to large companies as this merger will also ultimately result in monopoly by the number of companies.

Mergers are likely to generate anti-trust concerns and that is why they are subject to government regulations. These concerns lead to anti competitive practices which are fixing of prices, price ...