Merger Profitability in Industries with Brand Portfolios and Loyal Customers

Abstract

We study the equilibrium effects of mergers between firms with brand portfolios and brand loyal customers for pricing and profitability. We find that the "merger paradox" (Salant, Switzer and Reynolds 1983) is absent in these markets. The acquisition of brand portfolios can be profit enhancing for the merging firms and payoff neutral for the firms not involved in the merger. This may explain the emergence of brand conglomerates such as Richemont, PPR or LVMH.

A study to detect factors influencing the formation of loyal customers’ mental image

“…Loyal customers could be considered as long term intangible assets and reduce the chance of having any financial crises. However, one primary question is on how business units are able to find important factors in shaping loyal customers and what factors help make improvement on having reliable and loyal customers (Yüksel & Akgül, 2007;Fournier et al, 2008;Konrad, 2010;Loureiro & Kastenholz, 2011). Auh et al (2007) proposed a model of co-production and investigated the links between co-production and customer loyalty as well as the factors, which could increase the level of co-production in a financial services context.…”