Tuesday, 30 March 2010

The complex geographies of demerger

Many of the company profiles on this blog refer to the spatial impact of mergers - the tendency for big companies to buy-up smaller companies - appropriate their skills, knowledge and market share - in a bid to monopolise markets as much as possible. This is an inherent tendency of capitalism, as observed by Marx 150 years ago. It also explains why all the micro-economic theory they taught you at school or college is bunkum - as free market capitalism doesn't behave in space in the same it is supposed to on paper.

But Carphone Warehouse and Talk Talk, however, now have demerged. When they merged a few years ago in a move which was heralded as a significant development in the regional telecoms industry. Their demerger, however, is also heralded as a key development in the regional telecoms industry - and so good for the North West economy.

There are plenty of reasons to demerger - competition laws which act against the formation of monopolies or cartels - as a way of priming the newly created subsidiary business for sale to another company (something which is flatly denied by Talk Talk BTW), or as a means of establishing a clear business focus for the two demerged companies and therefore maintain profits (as seems the case with Carphone Warehouse and Talk Talk).

The spatial implications are interesting. All of sudden Irlam is HQ to a £1.5 billion company - establishing the town as in important node in the global industry - a move which refashions the town's economic identity - from industrial backwater to a global node. This probably will mean little for the local community, although the promise of 50 jobs + more to come - is obviously good news during an economic downturn. Talk Talk already employ 500 people in Irlam and 2000 in total across the North West. Their other key sites include a Warrington call centre + an office in Preston.

However, Carphone Warehouse have entered into a deal with US electronics retail - Best Buy - who plan to establish 14 50,000ft stores in the UK, including one in Liverpool - creating a total of 8000 jobs in the UK.

Best Buy were established in 1966 and are now a massive $45billion company - operating over 1100 stores the US, China, Mexico and Turkey - employing 155,000 people

Clearly the new British jobs are important, but Best Buy now have a 50% in Carphone Warehouse's 2400 UK stores. In effect an invasion through the back-door, which will threaten high street perennials such as Currys and PC World.

Source: Talk TalSk demerger 'good for NW' - Manchester Evening News

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