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Autor: gthree 21 December 2011
Words: 1672 | Pages: 7
East Texas View: Let's Talk Money!
October 10, 2011
East Texas View: Let's Talk Money!
Hi and welcome to East Texas View. I am your host Lydia Grathree and today I have with me Representative Nick Perry of Smalltown, Texas and CEO of G-3 Trucking Ernest Anderson. Today we will discuss the relationship between government, the economy, and Lowe's. Our panel will discuss what type of situations might Lowe's run a high risk of violating antitrust laws? How might the government react to assure fair competition within Lowe's given market? In what ways might Lowe's create a benefit externality? In what ways might it create a cost externality? How might the government respond to the externalities created by Lowe's?
We will begin this discussion with the opinion of our government official Mr. Perry. Representative Perry what type of situations might Lowe's run a high risk of violating anti-trust laws?
Well Ms. Grathree, Lowe's is a huge company with stores in very different locations. The risk of violating anti-trust laws grows as a company does. Acquiring other smaller company's like the corner parts store can cause some problems for a company such as Lowe's. Especially when they have contracts with competition of the hardware giant. For example when Lowe's acquired Eagle Hardware and Garden they waited out the Federal Trade Commission so that they could be in compliance with anti-trust laws. Company's have to practice patience, especially dealing with the government. Not moving beyond the boundaries of the law.
Well Mr. Anderson do you agree with Representative Perry?
Well Ms. Grathree I would have to agree that it is important for a company to practice patients when it comes to dealing with the government. The Federal Trade Commission is one of the departments that are set up to protect consumers, as a CEO I have to deal with making sure that our company stays in compliance and in good standing with them.
Okay Mr. Anderson give us an example of how Lowe's can create a benefit externality or a cost externality.
Ms. Grathree, if I was running a company like Lowe's the easiest way to create a benefit externality is to purchase suppliers. When you purchase your suppliers you gain products that at once you had to pay for. Of course in the beginning it would be a cost externality however in time that would defiantly change to a benefit. Having a ready supply of wood for instance, while eliminating the competition, would help Lowe's continue to grow and cut cost.
Wow, Mr Anderson seems like you have given a lot of thought to what it would take to create a benefit externality. What about you Representative Perry, how do you think the government would respond to these externalities?
Ms. Grathree I believe that the government would try to keep Lowe's for becoming a monopoly. Since the early nineteenth century government has been trying to keep "merger to monopoly" out of big business. I would say that buying their suppliers might give them benefit externalities they would like but also put others at their mercy. Government would probably have to put restrictions on productions or impose some taxation onto the company. According to Keat and Young, "A third, rather new way, under the 1990 Clean Air Act, is for the government to set maximum pollution levels, and then sell licenses to companies to give them the right to pollute." So their are some things that government can do to slow progress down.
Okay Repersititive Perry what is the importance of the government as a buyer in a market economy? From both a governmental and a business perspective.
I would say that the first and most important function of our government is to provide the economy with a legal structure. Without this an economy may collapse. Ensuring property rights, providing enforcement of contracts, and acting as referee and imposing penalties are the functions that are required of a government. For our government to be able to do this they have to create regulations, legislation, and a means to ensure product quality, definitions of ownership rights and enforcement contracts. The FDA, FED and SEC are examples of how government is used to achieve these task. On a personal note, it is important that businesses have some consequences to their action, so us little guys do not get run over.
Same question Mr. Anderson.....
Well Ms. Grathree, I would have to say that as one of those little guys...government can also make it hard for us. As a honest and hardworking business owner I know that the government is trying to keep every thing above board but sometimes they seem to hurt the little guys more than big businesses. With so many regulations it is hard for smaller businesses to compete with the bigger ones, since money is always at the root. However, as a consumer, I do agree that with out them many consumers would get taken advantage of, without a second thought. Some, not all mind you, businesses are out to make money and do not care if others including consumers get hurt in the conquest. However there are those who take pride and help in their communities and cities and even our nation.
Well Mr. Anderson seems like you are both passionate about what government has to offer, in what ways might Lowe's do business with the government?
Lowe's could bid for government contracts to supply tools or equipment. They could even bid with other contracting company's to supply for the company's that win government bids towards building government buildings, such as schools. By biding they are scrutinized the same as all the other company's that bid, judged by the same rules so to speak.
Okay, Representative Perry from the government's perspective, what might be the benefits and drawbacks of buying from the company?
Honestly, done right it could benefit both the government and the company, however their can always be accusations of favoritism Being a representative I understand that it can hurt when company's and the public think that government is playing favorites.
Mr. Anderson from the company's perspective, what might be the benefits and drawbacks of selling to the government?
Ms. Grathree it would work both ways I believe, the community has to know that they are not being manipulated. They have to be able to see the reasoning in writing. Make sure that it is all on the up and up.
Gentlemen, I would like to ask you both in what situation would Lowe's likely consider a merger with another company say Wal-Mart or Microsoft?
That would be a huge mistake, only because both these company's are giants in their own right. The complications of bring a supplier into a merger are hard enough. Imagine having two giant try to merge together.
Well, Representative Perry it would defiantly branch out Lowe's. As you stated they are a giant in their own right, and it would be a lawyers nightmare with all the acquisitions and paperwork. Looking for anything that could turn the company's in on themselves. I would think if it was possible however it would give more worth to both company's.
Okay Mr. Anderson what risks and benefits would a possible merger present?
Well, the risk as I said would be the possibility that the government would sanction or impose more taxes on the company's, and the public opinion might suffer because the would defiantly become the "big bad company" however the benefits would defiantly be in the promotional areas. Having two huge company's come together, with two different clientele wont hurt either when it comes to business. Wal-Mart would still specialize in everyday items, and Lowe's would still specialize in home improvement. However, they can help each other when it come to marketing. Think about it. If everyone who shopped at Wal-Mart saw advertisements for Lowe's and vice versa. You could cut on marketing budget in half, and still reach the same amount of consumers.
Alright, Representative Perry how might the government respond to the merger?
I would say they would not be in favor of such a merger. This would make the company owners to big to keep in control, to watch over so to speak. According to the United States Department of State "In general, government antitrust officials see a threat of monopoly power when a company gains control of 30 percent of the market for a commodity or service." Although they do not both offer the same exact commodity or service they do offer some. That would make them very powerful, and the economy very unstable if they were to come together.
Okay gentlemen last question. Do you believe the two companies would merge? why or why not. Representative Perry you first.
No, I do not think so. Both company's are doing well without having to go to the trouble of working out a deal that may get blown out of the water by the government.
Mr. Anderson your take on the merger of giants?
I believe that if I were Lowe's it would defiantly depend on the deal. What benefits my company would get from the merger, how much controlling interest would my company have in decision-making and mostly what is the vision once the merger was complete. These would be questions I would ask my self and my board of directors. Bottom line I would have to see the benefit and cost before making a decision. Until I saw those numbers and had all the information I would have to agree with Representative Perry on this one.
Thank you gentlemen
Well, that's our show for today. I hope you enjoyed it and we invite you back next week when we will have renowned business guru and motivational speaker Mai Biz. Mrs. Biz deliver a two part seminar on a couple of today's hottest business topics: competitive advantage and international business.
Keat, P., & Young, P. (2009). Managerial economics: Economic tools for today's decision makers (6th ed.). Upper Saddle River, NJ: Prentice Hall.
United States Department of State. (n.d.). Monopolies, mergers, and restructuring. Retrived October 10, 2011 from http://economics.about.com/od/smallbigbusiness/a/monopoly.htm.