EC0-Firms, page no 209-215 #ECO #Firms

What are mergers:

Mergers are when two companies come together to form a single, larger company. In a merger, both companies combine their resources, assets, and operations to work as one entity, often with the goal of increasing market share, reducing costs, expanding into new markets, or improving efficiency.

There are different types of mergers:

• Horizontal Merger:

  *Description: Occurs between companies in the same industry and at the same stage of production.

  
  

  *Purpose: To reduce competition, increase market share, and achieve economies of scale.

  
  

  *Example: Two car manufacturers merging.

• Vertical Merger:

  *Description: Involves companies in the same industry but at different stages of production (e.g., a manufacturer merging with a supplier).

  
  

  *Purpose: To improve supply chain efficiency, reduce production costs, and secure control over essential materials.

  
  

  *Example: A smartphone manufacturer merging with a chip supplier.

• Conglomerate Merger:

  *Description: A merger between companies in completely unrelated industries.

  
  

  *Purpose: To diversify business interests, reduce risk, and tap into new markets.

  
  

  *Example: A food company merging with an electronics company.

• Market-Extension Merger:

  *Description: Occurs between companies in the same industry but different geographic markets.

  
  

  *Purpose: To gain access to a new market, increase customer base, and expand geographical presence.

  
  

  *Example: A U.S.-based bank merging with a European bank.

• Product-Extension Merger:

  *Description: Involves companies that sell related products in the same market.

  
  

  *Purpose: To broaden product offerings and reach a larger audience.

  
  

  *Example: A beverage company merging with a snack company.

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