If you've ever rented a movie from Redbox, you probably did not suspect your money to be going to McDonald's, at least until recently when Coinstar bought the film-providing business.
Similarly, Disney often masks its ownership of ESPN, ABC, Warner Brothers, etc. With monopolies progressively forming, the question of what a customer's money is actually supporting arises.
"These types of corporations can be deceiving," said Holly Howell, senior in marketing. "What if you didn't support a certain company, and yet that's where your money is going?"
Perhaps if certain companies marketed their ownership of other businesses, people would be more apt to buy their products, knowing exactly to whom their dollars are going--at least that's what some students believe.
"If people like a particular brand, and know that even through purchasing products from another business it will support that brand, their buying habits may change in favor of that certain corporation," Howell said.
According to Dr. Achilles Armenakis, director of the Auburn University Center for Ethical Organizational Cultures, it is common for companies not to make an effort to put their brand on a certain product. He said that, for example, Pepsi bought Aquafina, but Pepsi is not included on the Aquafina bottle. Armenakis said one reason for this is that when consumers become angry with the parent, they may boycott the other product.
Another thing which might cause companies to think twice about buying another company are the differences between the two business' organizational cultures.
"If the two cultures are incompatible the synergies may never develop," Armenakis said. "Whenever two companies merge there should be a financial due diligence and a cultural due diligence conducted."
Though some may find these tactics misleading, Armenakis said there are some benefits of expanding a company's business to include other types of merchandise.
"A company can acquire another company in order to capitalize on synergies," Armenakis said. "Usually, a company identifies its core competencies and then buys another company that will allow it to apply these core competencies in it operations."
Maddie Cook, senior in biomedical sciences, said she could also see the benefits of this expansion.
"For the companies, it will obviously bring in larger customer base and in turn, more money," Cook said. "They can reach people who, previously, may not have been interested in buying any of their products."
Armenakis explained that companies might enter into a strategic alliance to more successfully sell their products or offer services. Disney, by being in the entertainment business, has similar competencies as ESPN and can expand its product lines to include sports enthusiasts, he said.
But, with Disney facing struggles with recent box-office failures, like "Mars Needs Moms," and with ESPN standing as the most successful sports network with the ability of funding itself, could it be possible that the latter is better off on its own? Armenakis said that if separation would allow both companies to benefit, then this could be justified, but the would entail a complex process in terms of stock shareholders.
For now, numerous conglomerations will continue to dominate the market, and possibly set a future trend.
"This is only going to become more common," Howell said. "When companies grow larger, they're going to just buy more companies."
Do you like this story? The Plainsman doesn't accept money from tuition or student fees, and we don't charge a subscription fee. But you can donate to support The Plainsman.
