With the emergence of new markets that demand services and products from train makers, many companies offering these services are striving to make their presence felt for them to win competitive advantage against their competitors. Following the dynamics and high investment cost involved in the train making industry, companies are strategizing on various methods that can win them a competitive advantage in these markets. Merging of companies is a strategy that the Chinese government is employing to win a competitive advantage over its competitors especially from Europe.
Two of the biggest Chinese train makers companies in China are planning for a merger deal. The merger deal is meant to increase pressure on oversea competitors including Alstom SA (ALO), Siemens AG and Bombardier Inc. although the two companies are already the world’s leading rail equipment companies, the Chinese government has ordered for a merger of the two. The merger is perceived to give the two companies added competitive advantage over their rivals by providing cheaper offerings. Cheaper offerings will enable the companies to win increased overseas orders. The Chinese government perceives the merger as an important plan as it would create a strong global competitor.
Other renowned rail equipment that are major competitors of the two Chinese train makers companies including the Siemens, a Germany based company and France-based Alstom company are facing constrained spending from public in markets back home. Such challenges facing the France and Germany companies give the Chinese companies an added competitive advantage. The major reason for a merger in the two world’s best Chinese rail equipment companies is the increased emerging markets including Eastern Europe, Latin America, South East Asia and Africa. Aggressive competition among the rail equipment companies is required in order for the competitors to win overseas rail tenders. Chinese government has taken the initiative to tour the emerging markets to market and sign deals and contracts on various tenders on rail equipment, construction and engineering. Due to cheap offerings from Chinese companies, China has enjoyed a competitive advantage in the emerging markets.
The unsuccessful merger between Siemens that is the Europe’s biggest engineering company with Alstom woes the future of the European companies with such aggressive competition from China. The unsuccessful merger between the two European countries disadvantage them as the fail to enjoy the benefits and advantages of the company merge that are enjoyed by the two Chinese companies that merged into one. Benefits and advantages resulting from a merger include; cost efficiency, increased value generation, increased market share, reduced costs and expenses, diversification of products and services, improved skills and knowledge, economies of scale, tax advantages and avoiding inefficiencies. The Chinese companies can tap the listed advantages of a merger giving them the relevant competitive advantage that enables them to make their products more competitive in both emerging markets and existing ones.
The two Chinese train makers companies will enjoy the benefit of combining skilled and talented professionals working together for a common goal. Quality is a factor in any company as it gives the company competitive advantage. Skills and knowledge of workforce in a company greatly determines the quality of products and services that a company produces. Merging of companies results to production of better quality goods as skilled, knowledgeable and talented from the joining companies are employed. When experts from different departments work together towards a common goal, more innovative ideas are generated. The combined skills in different departments enable smooth operations in effective and efficient manner. Skilled professionals reduce stupid mistakes and errors saving on costs related to such mistakes and errors. Experts and talented professionals help companies in achieving competitive advantage as they achieve better strategies as a result of consultations among experts from the two combining companies. Better strategies in business operations yield tremendous profits in the sense of improved work performance output and financial gains.
Following the many benefits resulting from company merging, the new formed Chinese company formed from merging the two worlds top companies in train making, the company will increase its market power which will help it rise above competition from other train making companies especially the Alstom SA (ALO), Siemens AG and Bombardier Inc. from Europe. The newly formed company will take advantage of high technological advancement against price wars and obsolescence. Increased market power will help the newly formed Chinese company have a competitive advantage.
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