Mergers and Mergers and Mergers
Natural selection is basically when a bigger, stronger fish eats the meeker, smaller fishes, and then grows bigger. It’s the natural law of survival of the fittest. Not surprising, corporations are evolving to follow this paradigm.
Here’s a few highlights of companies that have merged or been acquired over the years. Notice how it’s a blend of industries? Technology with food services; online education with retail; social media with photography.
- In 2012, Facebook purchased Instagram for $1 billion. Facebook also tried to scoop up Snapchat, a direct competitor of Instagram. However, Snapchat didn’t sell out. So Facebook played dirty: they updated the Facebook and Instagram mobile apps to have nearly the same exact functionality of the Snapchat app. Specifically, Facebook/Instagram emulated the expiring stories and augmented reality photo filters. (Source: How Much Is Snap Hurting From Facebook’s Imitations?)
- In 2014, Arizona State University partnered with Starbucks to offer free tuition for ASU’s 60+ online bachelor degree programs for all Starbucks employees that work more than 20 hours per week. Since its inception, over 8,000 Starbucks employees have enrolled in this program. Apparently this has greatly increase employee retention at Starbucks. It makes sense, Starbucks has a well known reputation of treating its employees well. (Source: Starbucks VP: ASU tuition program good for business).
- In August 2017, Amazon acquired Whole Foods. With this acquisition, Amazon Prime members are able to buy significantly discounted groceries at Whole Foods. For example, a pound of bananas for about 50 cents. To sweeten the deal, all Whole Foods will have self-service kiosks similar to Redbox. But instead of renting a new DVD or video game, customers will conjure up anything using a magical device called an Amazon Locker. It’s a convenient way for Amazon customers to pick up their online orders in person, similar to a PO box at the post office. The benefit is simple: it’s even faster than home delivery. (Source: Amazon Prime members will get special discounts at Whole Foods)
- In September 2017, Walmart joined forces with Google to sell its products on Google Express. Many believe this was a direct response to the Amazon/Whole Foods merger. Their new business model utilizes the Google Home voice controlled device to enable customers to order products from 40+ retailers like Target and Costco under its Google Express program. (Source: Walmart joins forces with Google on voice-activated shopping)
- And now in October 2017, two of the largest for-profit schools, Strayer University and Capella University, are merging their companies together. The Strayer/Capella partnership empowers current students to seamlessly transfer college credit between the two universities. Credit reciprocity between colleges is a wonderful strategy, regardless of which schools allow it. Nothing is more frustrating than having credits not transfer to a new college. After all, who wants to waste time and money? (Source: The Strayer/Capella Merger and What it Means for For-Profits).
Whoopty Do, What does it all mean?
As mentioned, corporate team-ups seem to be the way of the future. For example, Disney now owns Marvel and Pixar. So there’s a lot of consolidated power in these huge corporations, which is scary because it limits the choices of consumers and creates a barrier to entry for new business owners looking to offer similar products/services.
Also, I think we’re seeing less new ideas. Instead, it’s a rebundling or new way of thinking about an old idea.
- The Convergence of Corporations – These days, it seems like the “mom and pop” companies, the little fish, are getting eaten up but these conglomerate giant sharks in their sector. There’s still plenty of fish in the sea, but the sharks are expanding their territory by redrawing territory lines.
- Innovation is Dead. Welcome to the Age of Corporate Team-ups – Businesses are investing less in R&D to innovate new products; instead they’re strengthening their foothold in the market with exclusive deals and partnerships, such as discounted or more convenient services. Like ideas for new movies, it seems creativity is pretty much dead. Everything these days tends to be remakes, sequels, or direct-to-Netflix Adam Sandler films.
- Consumers Value Convenience more than Privacy – No one cares about anything, except convenience anymore. Our personal data is captured, studied, and sold by marketing colossuses (ahem, Facebook). Walmart recently proposed a new service to deliver groceries straight into their customers’ refrigerators (Source). Although it may be initially creepy to have a stranger enter your house and stock your fridge, I think the idea will take off. People are probably willing to sacrifice their privacy, just to have good food stocked up in their fridge at all times. Who has time to shop at a store anymore?
How can businesses stay relevant with all of this competition? Have a Heart and Use your Brain
- Socially conscious companies will succeed in the long run – In a survey to millennials, 56% said they would refuse to work for a company that they found to be unfriendly to social and environmental causes. Furthermore, companies that offer corporate social responsibility programs are known for having increased employee retention. Finally, it makes sense from a financial standpoint: there are many tax credits and deductions for businesses that “Go Green”. Firms need to be held accountable for pollution climate change.
- Take Care of your Employees – Employees that feel valued perform better. It’s a fact: there’s been countless studies on how a positive work environment has a direct correlation on job performance. Business skills and industry knowledge are constantly in flux. So employees must continuously learn about new trends and dynamics in the market. That’s why organizations provide professional development to their employees. Treating employees well and helping them to adapt and grow professionally can result in gains in profit and productivity. A great example is Microsoft’s new CEO, Satya Nadella. He is credited with “saving the company” by stopping infighting, restoring employee morale, and creating more than $250 billion in market value. And he did this by changing the culture of Microsoft from one of “Dog Eat Dog” to a culture of synergistic collaboration. Southwest Airlines, Whole Foods, and Virgin Mobile are also recognized for having a wonderful work environment and culture.
- Innovate Faster – The issue with any large company is scalability. It’s hard to innovate with red tape and bureaucratic policies. Look at any large company and you’ll see hundreds of vacant job positions. This may give the advantage to leaner, smaller businesses that can pursue new opportunities.
- Find Unique Ways to Delight your Customers – Think of products or services that simply delight you. I love that the DMV allows mail-in license plate registration for newer cars. I find it super convenient that my dentist sends me text message reminders of my upcoming appointments. It’s refreshing to walk into the local pizza shop and have a conversation with employees that remember your face. How can smaller businesses and entrepreneurs compete with giant companies that are practically monopolies? Simple, actually: care about and keep in touch with your customers. These days, everything is automatic instead of authentic.
- Know Thy Customer – It’s amazing how people get entranced to the glow of their iPhone and the constant influx of text messages, Snapchats, and Facebook videos. Because people are getting so comfortable communicating online, it’s sometimes hard to interact with or trust other people. For example, I saw a billboard on the highway this weekend that said something like “Avoid Small Talk. Shop Online!” These days, everything is automated. Sure, it’s convenient. But it gets very impersonal. Now at certain Applebee’s and Olive Garden restaurants, you can pay your bill on a tablet. We live in weird times. Times where convenience is king. I think people may be losing something because of the fancy technology. We all need to slow down and have a conversations with others. Small talk isn’t that bad of a thing, is it? I like it when I walk into a restaurant or store and they know my name. In a way, engaging customers is a great way to generate brand loyalty.
Welcome to Age of Convenience
Questions to Consider:
- In what ways do you think consumers forfeit their privacy for convenient services?
- Do you think creativity and innovation are “Dead”?
- How does company culture and employee morale affect a company’s revenue?
- What can unestablished companies do to compete against monolithic conglomerates?