Combining Many Firms Engaged In The Same Type Of Business Into One Corporation Is Called
Combining Many Firms Engaged In The Same Type Of Business Into One Corporation Is Called
Answer: Combining many firms that are engaged in the same type of business into one corporation is known as horizontal integration.
Understanding Horizontal Integration
Horizontal integration involves merging or acquiring other companies that operate at the same level in an industry. Here are some key points:
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Purpose: The main goal is often to increase market share, reduce competition, and achieve economies of scale, which can lead to reduced costs and increased profitability.
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Examples: If a bakery chain acquires other bakeries, it consolidates its position in the market by expanding its reach and possibly controlling a larger portion of the market.
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Benefits:
- Market Domination: A larger firm may have more influence over pricing and product offerings.
- Efficiency: Combining resources can lead to cost savings due to more efficient processes.
- Reduced Competition: Fewer competitors can make a market less competitive, giving the integrated firm more control.
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Challenges:
- Regulatory Concerns: Governments might scrutinize such mergers to prevent monopolies and protect consumer interests.
- Cultural Clashes: Integrating different company cultures can be challenging.
- Complexity: Managing a larger corporation can become more complex and challenging.
Summary: Horizontal integration combines firms in the same industry to grow market share and reduce competition, but it comes with potential challenges such as regulatory scrutiny and management complexities.