IGCSE, A Level Business Student Forum

Q22 Analyse the benefits of horizontal integration as growth strategies to a business. [6]

Possible Structure:
[KN]
[AN]
[AN+]

[KN]
[AN]
[AN+]

[KN] Increased Market Share
[AN] Acquiring or merging with competitors can result in a larger market share for the company.
[AN+] This can provide the business with more control over the market and the ability to influence pricing and market trends.

[KN] Reduced Competition
[AN] By integrating horizontally and eliminating or absorbing competitors, a business can reduce the level of competition in its industry.
[AN+] This can lead to higher prices and better profit margins.

[KN] Economies of Scale
[AN] When a company integrates horizontally, it can achieve economies of scale. This means that as the company produces more goods or services, its per-unit production costs decrease.
[AN+] This can lead to higher profitability and a competitive advantage in terms of pricing.

[KN] Innovation
[AN] The acquired businesses may bring fresh ideas, technologies, and expertise that can benefit the acquiring company.
[AN+] This knowledge transfer can fuel innovation and enhance the overall competitive position.

KN: Reduced Competition
AN: Horizontal integration can reduce the number of competitors in the market
AN+: This can lead to a more stable and predictable business environment, allowing the company to focus on long-term planning and innovation
KN: Improved Financial Performance
AN: If executed effectively, horizontal integration can result in improved financial performance
AN+: as the combined business can leverage its size and resources to generate higher revenues and profitability

[KN]Less competition in the market
[AN]horizontal integration leads to elimination of competition in the market
[AN+]This may lead to business charging higher prices for their product and increasing their market share

[KN]Economies of scale achieved
[AN]due to horizontal integration, economies of scale are achieved which means there is lest cost of production per unit
[AN+]This may lead to higher profit which may e used to fund expansion

[KN]Market Share Expansion
[AN]Horizontal integration allows a business to increase its market share by consolidating its presence in the same industry.
[AN+]This can result in a larger customer base and greater control over pricing and distribution.

[KN]Reduction of Competition
[AN]Horizontal integration can lead to the elimination of a competitor from the market.By acquiring a rival company, a business can reduce competitive pressures and potentially gain a dominant position in the industry.
[AN+] This would give them an edge over their competitors and help them dominate the market

[KN] Increased Market Share
[AN] Horizontal integration allows a company to consolidate its market position by acquiring competitors.
[AN+] This consolidation can lead to economies of scale, reduced competition, and enhanced bargaining power with suppliers and customers.

[KN] Diversification of product or service offering
[AN] Horizontal integration enables a company to diversify its product or service offerings while still operating in the same industry
[AN+] By acquiring businesses that produce complementary or related products, the company can create synergies, cross-selling opportunities, and a more comprehensive range of offerings to cater to a broader customer base.

[KN] Market Share Expansion
[AN] Horizontal integration allows a business to increase its market share by consolidating its presence in the same industry.
[AN+] This can result in a larger customer base and greater control over pricing and distribution.

[KN] Reduction of Competition
[AN] Horizontal integration can lead to the elimination of a competitor from the market. By acquiring a rival company, a business can reduce competitive pressures and potentially gain a dominant position in the industry.
[AN+] This would give them an edge over their competitors and help them dominate the market

(Kn) reduces competition (an) by horizontal integration mainly by taking over a firm can eliminate competitors (an+) this can reduce the competitive pressure for the firm
(Kn) economies of scale (an) when a business expands with other businesses even if its in another industry it benefits from lower longer run average cost (an+) this lower the cost of production which can be used to lower prices and further increase sales

(kn)less competition
(an)as the firm is taking over a company in the same market as their this reduces competitor
(an+)and increase its assets in that market
(kn)increase market share
(an)by improving quality of a product and the services
(an+)which will increase customer loyalty and brand image

[KN] increased market share
[AN] By joining with a frim that is in the same industry
[AN+] the business would be able to gain market share as increase output

[KN] economics of scale
[AN] horizontal integration would lead to increased size of the frim which would lead to economies of scale achieved
[AN+] this would give them an advantage over the other competitors

[KN]Increased Market Share.
[AN] This will lead to larger customer base with greater brand recognition.
[AN+] Thus this will further result in reduction of dependency on a single market with improved efficiency.

[KN] Reduction of competition.
[AN] Merging with or acquiring competitors can reduce market competition , potentially leading to better pricing power and improved profitability.
[AN+] Thus this will increase control on the overall assets.

[kn] decrease in competition
[an] taking over or merging with the same market reduces competitors and gives an advantage over other competitors
[an+] helping to increase market share and asses in that market
[kn] economies of scale
[an] since two companies have joined together they have a higher amount of resources and lower avg costs
[an+] increasing profits

(KN) Market Share Expansion
(AN) Horizontal integration allows a business to increase its market share by consolidating its presence in the same industry.
(AN+) This can result in a larger customer base and greater control over pricing and distribution.

(KN) Reduction of Competition
(AN) Horizontal integration can lead to the elimination of a competitor from the market. By acquiring a rival company, a business can reduce competitive pressures and potentially gain a dominant position in the industry.
(AN+) This would give them an edge over their competitors and help them dominate the market

[KN]Horizontal integration helps in rationalization
[AN]if the merged business has 2 managers who perform same tasks then it may make one of them redundant which can help to reduce labour costs and add to profits
[AN] resulting in positive synergy i.e 2+2=5


[KN]Decreasing competition'
[AN] when 2 business producing same product merge, not only a direct competition is eliminated but customers of the merged business also become customers of new business
[AN]leading to greater sales and high market share