Merger
The word Merge means to combine
Merge in economics means when 2 or more businesses get together for more strength and efficiency
Types Of Merger
Horizontal Merger
Vertical Merger
Conglomerate Merger
Market Extension Merger
Product Extension Merger
Horizontal Merger
Firms in the same industry and stage of production combine to reduce competition and increase market share.
2 Car manufacturing companies combine
Vertical Merger
This occurs between firms at different stages of the supply chain. It sharpens efficiency and control.
Example: A car manufacturer acquiring a tire company.
Conglomerate Merger
Firms from unrelated industries merge – a bold diversification play.
Example: A soft drink company merging with a film studio
Market Extension Merger
Firms selling the same product in different markets merge to expand geographic reach.
Product Extension Merger
Firms in related markets or products combine to widen product lines.
Main Reasons For Merging
Economies of Scale – cost per unit falls as production rises.
Market Power – combined entity can set prices with more command.