Difference between conglomerates and vertical ownership
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. Horizontal Integration:
Horizontal integration is the merger of two firms at the same stage of production, producing the same product. For example, the merger of two car producers or two TV companies. There are two key motives behind horizontal integration. One is to take greater advantage of economies of scale. The new firm will be larger and hence may be able to produce at lower average cost.
2. Vertical Integration:
Vertical integration occurs when a firm merges with another firm involved with the production of same product but at a different stage of production. It can take the form of vertical integration backwards or vertical integration forwards.
Vertical integration backwards is when a firm merges with a firm that is the source of its supply of raw materials, components or the products it sells. For example, a supermarket chain may take over a bakery and a tyre manufacturer merger with a producer of rubber. The main motive behind such integration is to ensure an adequate supply of good quality raw materials at a reasonable price. Another aim might be to restrict the access of the rival firms to the supplies.
.................hope so it helps u.......................
Horizontal integration is the merger of two firms at the same stage of production, producing the same product. For example, the merger of two car producers or two TV companies. There are two key motives behind horizontal integration. One is to take greater advantage of economies of scale. The new firm will be larger and hence may be able to produce at lower average cost.
2. Vertical Integration:
Vertical integration occurs when a firm merges with another firm involved with the production of same product but at a different stage of production. It can take the form of vertical integration backwards or vertical integration forwards.
Vertical integration backwards is when a firm merges with a firm that is the source of its supply of raw materials, components or the products it sells. For example, a supermarket chain may take over a bakery and a tyre manufacturer merger with a producer of rubber. The main motive behind such integration is to ensure an adequate supply of good quality raw materials at a reasonable price. Another aim might be to restrict the access of the rival firms to the supplies.
.................hope so it helps u.......................
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