Practicing Success

Target Exam

CUET

Subject

Entrepreneurship

Chapter

Enterprise growth Strategies

Question:

Match the following: 

Description of Merger Type of Merger
1. A merger between Coca-Cola and the Pepsi beverage division a. Vertical Merger
2. A leading manufacturer of athletic shoes merges with a soft drink firm. b. Horizontal Merger
3. Indian Oil Merging with Shell UK c. Market Extension Merger
4. Suzuki, an automobile company, joining with a parts supplier  d. Conglomerate Merger
Options:

1-c, 2-d, 3-a, 4-b

1-b, 2-d, 3-c, 4-a

1-b, 2-c, 3-d, 4-a

1-c, 2-d, 3-b, 4-a

Correct Answer:

1-b, 2-d, 3-c, 4-a

Explanation:

Conglomerate:  A merger between firms that are involved in totally unrelated business activities. 

Horizontal merger:  A merger occurring between companies in the same industry. Horizontal merger is a business consolidation that occurs between firms which operate in the same space, often as competitors offering the same goods or service. Horizontal mergers are common in industries with fewer firms, as competition tends to be higher and the synergies and potential gains in market share are much greater for merging firms in such an industry. Example: A merger between Coca-Cola and the Pepsi beverage division, for example, would be horizontal in nature. The goal of a horizontal merger is to create a new, larger organization with more market share.

Market extension mergers : A market extension merger takes place between two companies that deal in the same products but in separate markets.

Vertical merger : A merger between two companies producing different goods or services for one specific finished product. A vertical merger occurs when two or more firms, operating at different levels within an industry's supply chain, merge operations.