Vertical Mergers: A vertical merger is a merger in which one firm supplies its products to the other. A vertical merger results in the consolidation of firms that have actual or potential buyer-seller relationships. The firms in vertical mergers operate at different stages of production process where buyer-seller relation or manufacturing at different stages of the same product is possible (Gaughan, 2007). There are two types of vertical mergers.
(i) ‘Backward or upstream vertical integration’ in which the primary motive is usually to move towards a dependable source of supply. Dependability can be determined not just in terms of supply availability, but also through quality maintenance and timely delivery considerations. Having timely access
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Conglomerate mergers result in joining of firms which compete in different product markets, and which are situated at different production stages of the same or similar products. That is to say, neither the products nor the inputs of these merging firms are the same. Conglomerate mergers result in significant advantages gained by the merging firms since they are the fastest means of entry into different activity fields in the shortest possible time span. Moreover, they reduce the financial risks by “not putting all the eggs in one basket” (Gaughan, 2007). There are three types of conglomerate mergers:
(i) Product Extension: In this type of mergers, firms that sell non-competing products and use related marketing channels of production processes merge.
(ii) Market Extension: In such mergers, merging firms manufacture the same products or services but market them in different territorial markets. That is to say: it is a merging of two firms selling competing products in separate geographic markets. In this way the firms get the opportunity to market their products in a wider range.
(iii) Pure Conglomerate Mergers: In such mergers, there is no relationship between firms neither in respect to manufacturing nor in respect to marketing and mergers are realized between firms operating in entirely different
Professor Choi, in 2001 (on behalf of Rolls Royce), modeled the potential for conglomerate effects arising from the merged entity bundling goods, which could lead to a reduction in competition. He states that consumers must buy one engine along with one set of avionics, making the goods complementary, and assumed that the same price is charged to all consumers. Choi considers a market where there are only two engine suppliers (GE and Rolls Royce) and two avionics suppliers (Honeywell and ...
I am interest in the study of this topic because I am curious about the financial effects of such a merger.
Horizontal integration brings organizations under one organization, and system. Vertical integration brings together all or part of a production procedure under one management, the fundamental principle of vertical integration is supplying a set of health care services to satisfy the needs of individuals in a specific group.
Topic A (oligopoly) - "The ' An oligopoly is defined as "a market structure in which only a few sellers offer similar or identical products" (Gans, King and Mankiw 1999, pp.-334). Since there are only a few sellers, the actions of any one firm in an oligopolistic market can have a large impact on the profits of all the other firms. Due to this, all the firms in an oligopolistic market are interdependent on one another. This relationship between the few sellers is what differentiates oligopolies from perfect competition and monopolies.
Gaughan, P. A., 2002. Mergers, Acquisitions, and Corporate restructuring. 3rd ed.New York: John Wiley & Sons, Inc.
Vertical integration is when an organisation own companies on two or more levels of the buying chain. Examples of this can be found within “The Big 4,” all of them own an airline, travel agent and a tour operator. The companies have until recently used different names for their travel agency, airlines and tour operators, but now they are power branding their companies so that customers can see whom they are booking with. An example of this is TUI UK, which has rebranded its companies using the Thomson name.
The purpose of this paper is to attempt to recompile information about the merger of two corporations; one of many taking places i...
In this industry, companies need to provide a national network, meaning that there are significant economies of scale to be made with a merger. For example, when T-Mobile and Orange decided to merge, their ambition was to combine both networks, eliminate duplication and create a single super-network. Furthermore, they said it would provide the customers with a bigger network and better coverage .
The type of merger between Electronic Data System (EDS) and AT Kearney is called Forward vertical merger. Forward vertical merger is when two or more companies combines together in the same industry but different field or when two companies producing goods and services for a product. Electronic data system, the US information technology group, brought AT Kearney, the global strategy consultancy firm in a deal worth $96m. Electronic data system was firm involving producing information technology equipment’s bought AT Kearney an IT consultancy firm.
In the horizontal integration, the company product range is from a wide clientele. That is they sell product either clothing or luxurious foods from different manufacturers. These give them the edge since the products they offer a variety for the customers to choose from, and hence they can shop less than one roof (Cole, 1997). In the vertical integration strategy, the firm will deal substantial with products from a single supplier and M&S gets the exclusive rights to deal with the product and its supply to the market. This is necessary when the company aim is to serve an identified target market which is exclusive and has the potential to sustain and grow the company substantively. These employ a tar...
Mergers among companies is not a new concept, in fact, this concept has been used since the 1980s. There are a few reasons that companies decide to merge. A merge can increase the performance which produces a stronger company. A stronger workforce is the dream of all companies. Companies love the idea that they are able to produce a product in half the time. Diversification is another reason companies like mergers. A company that merges to diversify may acquire another company in a seemingly unrelated industry in order to reduce the impact of a particular industry's performance on its profitability. Companies seeking to sharpen focus often merge with companies that have deeper market penetration in a key area of
In recent times, global competition and the drive to leverage advantage, has resulted in both small and larger companies combining resources. Consolidations of markets are one of the main reasons for Mergers and Acquisitions. Corporate organizations possessing similar products and services are looking to both consolidate and expand; thereby utilizing joint interests to further their goals.
Mergers mean two or more companies combining together to form one business or firm. There are six different types of mergers: Horizontal, Vertical, Conglomerate, Market extension, Product Extension and Diversified activity.
Vertical integration is where a company becomes their own supplier or distributor through acquisition. Seprod uses the strategy by their acquisition of Belvedere Estate in 2006 so as to expand its dairy farm pastures to increase their supply of milk output from the dairy farming. They also use vertical integration in their subsidiary Industrial Sales Limited. This is done by making them the main distributer and marketer of their
Mbda.gov. 2014. 5 Types of Company Mergers | MBDA Web Portal. [online] Available at: http://www.mbda.gov/node/1409 [Accessed: 8 Mar 2014].