How to Increase Market Share During a Merger

Mergers can increase market share when organizations get the strategy right.

One of the main objectives of a merger is to increase market share. In theory, merged organizations can achieve this in a number of ways: by offering customers of both companies a wider range of products; by using their combined production resources to reduce costs and offer customers lower prices than competitors; or by combining their sales and marketing resources to improve market penetration. However, according to commentators such as Innovation Associates, only about 20 percent of mergers deliver the intended benefits.

Instructions

1. Reach more customers with the same products. Continue selling to the combined customer base to increase market share immediately. Analyze individual product portfolios to identify complementary products aimed at the same type of customers. Offer complementary products to existing customers to increase share in other sectors. Attract new customers by offering a wider product range, increasing market share further.

2. Focus on niche sectors where the merged organization has greater strengths. According to Managerial Auditing Journal, the audit firm Pricewaterhousecoopers increased market leadership in certain industry sectors following a merger.

3. Use portfolio power to dominate a market and increase share in the longer term. According to consulting firm Charles River Associates, portfolio power refers to the situation that occurs when two merging companies bring together product ranges that sell to the same customer groups, but in different market sectors. The merger would not necessarily increase market share in the individual market sectors. However, the combined portfolio could make the new organization a more attractive supplier, leading to longer-term market dominance.

4. Combine marketing resources. Use joint budgets to increase expenditure on advertising and other marketing communications. Communicate the combined capability and product range of the merged organization to existing customers and new prospects. Integrate the customer records and profiles from individual company databases to provide a single view of customers.

5. Rationalize the sales structure to ensure that the combined sales force does not overlap. Allocate sales representatives to different geographical territories or industry sectors to improve market coverage as a basis for increasing market share. Provide product and market training on the complete merged product range and customer base to ensure that the sales force can sell effectively across the market.

6. Combine production resources to increase capacity and output. Use economies of scale to meet demand that individual companies could not supply. Improve competitive advantage by using scale to create barriers to entry. A case study of a hypothetical merger in the steel industry by the Asian Development Bank highlighted the barriers a new competitor would face in a market sector dominated by larger merged suppliers.

References

• Innovation Associates: Successful Post-Merger Integration: Realising the Synergies; Nils Bohlin, et al.
• Charles River Associates: A New Doctrine in Merger Control; April 1998
• Managerial Auditing Journal: The Implications of Merger for Market Share, Audit Pricing and Non-Audit Fee Income: The Case of PricewaterhouseCoopers; K.M. Pong, et al.; 2006
• Asian Development Bank: Case Study 1: A Hypothetical Merger