Question

Topic: Strategy

To Merge, Or Not To Merge

Posted by Anonymous on 6/14/2014 at 10:08 AM ET 250 Points
Hi there guys,

Need your expert advice again today...I'm a partner with a company in South Africa. We started out offering Branding Services and recently we were given an opportunity to also offer our clients with Web Hosting, ADSL & SMS (short message services, including short codes) services, which we will be able to offer at pretty much the lowest fees in the country, thereby allowing us to position ourselves in the market by not only offering branding & marketing services, but pretty much an all-in-one deal for our clients.

We were thinking about running the two companies separately (1) Branding and (2) web solutions, but we would actually love to include it all under one new business (name), hence why we are thinking about getting a new business name to accommodate this "move".

Would you say that it is better to have two separate companies, each with its own branding and target audience and focus in mind, or will it be better to merge all of these services together under a single company?

We did think that these services might just be a little diverse to offer under a single company, yet we also don't want to go through the hassles of running two companies with their own set of accounts, staff etc etc...

I would love to hear your thoughts.

Thank you so much.
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RESPONSES

  • Posted by mgoodman on 6/14/2014 at 12:04 PM Accepted
    You are probably right to have two separate companies, since the primary target audiences and benefits offered are different. There is no reason, though, that they can't share staff and cross-sell to clients who need both kinds of services. The relationship between the companies doesn't need to be a carefully guarded secret.

    One thing that bothers me though is your statement that you will be able to offer the lowest fees in the country. If the only competitive advantage you think you have is a low price, it's unlikely you'll be able to build a long-term sustainable business. You may want to re-think the positioning and the business strategy before it's too late and you are stuck with a commodity position.

    There's a lot of evidence that customers and consumers prefer to pay a premium price for products and services they perceive to be superior. And if they don't think your offering is superior, a low price is not likely to save you. Any competitor whose offering is seen as better will trump your low price with more desirable benefits.
  • Posted by telemoxie on 6/16/2014 at 8:40 AM Accepted
    I would think about how existing marketing service companies will perceive you. They will probably be reluctant to use communication services from you if they perceive you to be a competitor. The simplest and most honest approach would probably be two separate companies.

    Also, I think it would be difficult to have two opposing ideas (least expensive communication services, most robust and service oriented branding services) in a single organization.
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