Asses the likely impact on a domestic firm of a global merger with a bigger MNC (Multi-national corporation) 10marks

A merger between two firms can be explained as a joining of assets and operations, who begin trading as one firm. For a smaller firm operating in only one country, a global merger will create a huge opportunity to benefit from economies of scale provided by a bigger firm. Economies of scale are benefits firms can receive due to their size and the wealth of assets available to them, and result in lower costs for a firm, for example through buying in bulk. This reduction in costs is likely to be significant for a smaller domestic firm, as it is a clear source of competitive advantage over rivals that can result in a firm boosting profits, either through the ability to improve profit margins through reduced costs, or to drive sales through a reduction in prices made possible by lower costs.However, this isn't to say the merger comes without potential risks for both firms. For the domestic firm, a merger with a huge MNC may have negative impacts on the culture of the firm, which may have been cultivated over many years. Culture changes are common with new ownership in firms, and can result in employees of the smaller firm feeling alienated, and as a result of this unmotivated. This could lead to a higher labour turnover rate, as employees leave due to the changes. Higher labour turnover rates result in greater recruitment and training costs for the firm, reducing their profitability in the short run at an already volatile time for both firms as they merge.