will also eliminate the competition between these companies, two of the world's largest PDA manufacturers.

ankurmit wrote:Merger Analyst: Two long-time competitors, manufacturers of personal digital assistants- better known simply as PDAs-have agreed to merge their companies. The main purpose of the merger, put forth by outside analysts, would be to collaborate on the development of a PDA redesign that will allow the new merged company to manufacture PDAs at a lower cost.

Although the post-merger retail price, to be agreed on by the companies, will likely cut into the new company's overall profit margins, it will also eliminate the competition between these companies, two of the world's largest PDA manufacturers.


Given the above, which of the following statements, if true, as made by the president of one of the two companies, best illustrates the probable thinking behind the merger?

1 "By combining forces we will ensure that consumers pay the lowest possible cost for the next generation of Personal Digital Assistants." - lowest possible cost- no where does the argument say tht the new retail price would be the lowest one. it may well be tht thr is a 3rd company which offers lowest price though the quality is not good. Competitors are compnies who are at the same level in temrs of price,quality etc. so we are only talking abt the price, profit and merger betwen competitors A and B. cant imply the new retail price calls for the lowest of all.
2 We would rather secure relatively lower PDA profits than lose market share to a competitor."

3 Combining forces will be beneficial to the business climate in this country by setting a model of collaboration and goodwill as opposed to fostering the current competitive environment existing in the PDA industry."

4 "The best way to permanently lower the retail price of PDAs is to eliminate our most formidable competition."

5 "Although long-term PDA retail costs may rise, our next generation of PDAs will decrease in retail cost."


OA later