Becton Dickinson’s merger with CareFusion sheds a new light on the relationships of companies in similar industries. Both specializing in medical equipment for hospitals, these companies might seem to be destined rivals to a COMM 101 student. However, this merger shows how it’s not always smart for companies to waste resources in a wrestling match. Businesses don’t always have to view markets as a free-for-all.
Image from ZUMApress.com. Taken from The Wall Street Journal.
The first thing that can be praised about this merger is that it shows how companies can quickly adapt their value propositions to meet customer needs. Sometimes a firm cannot afford the “transfiguration costs” associated with transient advantage to exploit the changing market on time. Short of the necessary operations and resources, it needs to look externally. With hospitals desiring more cost-effective and useful equipment, BD and Carefusion knew that one fast way to exploit the changing needs of hospitals is to join forces so that resources and infrastructure are quickly established to begin cashing in.
The concept of a merger also shows how firms don’t have to be limited with one single business model like differentiation focus strategy. Instead, firms with differing models can merge to form hybrid models, offering cheaper AND specialized products on a broader market. This is very potent when merging firms occupying different market segments of the industry. With BD specializing in catheters and CareFusion focusing on catheter-loading machines and software, the newly merged company will be able to grab a larger market segment with a more diverse pool of customers.