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Assignment Ac302 1. What Is Business Combination?: Market Capitalization
Assignment Ac302 1. What Is Business Combination?: Market Capitalization
2. Give Examples
Horizontal Combination
This type of consolidation of two or more organizations operating in the same line of
business. This combination results in a reduction of competition and larger market
capitalization.
Example A combination of two major sugar manufacturers ‘Sugar bell’ and ‘Crystal
Sweeteners’ operating in the same line of business is an apt example of a horizontal
business combination. This would result in the terminate of the competition.
Lateral Combination
This type of business combination is the combination of two businesses that deal in a
different line of business; however, they are connected in some way or another.
Convergent
Supplier A deals in printer ink, papers and folders and Supplier B deals in the same
business. ‘Pressfit’ is a leading printing press. The combination of Supplier A and B
with Pressfit will be a convergent combination.
Divergent
Example
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An oil refinery organization gives its product which is crude oil to its dependent
organizations as raw materials. The downstream industries use this for creating
petroleum and machinery oils. The combination of such a business is called divergent
lateral combination.
Diagonal
Example
Service centres for various mobile phone manufacturers are not owned by the
manufacturer but authorized by them. In this way, the service centre can cater to the
needs of the customer by delivering original spare parts and providing a service that is
authentic and reliable.
Mixed
Mixed combinations are also termed Circular combinations. These are unrelated
businesses that combine to form a new business is called a mixed combination. The
new business formed will have insights from the management of both the
organizations which will help in creating an organizational and functional structure
that creates the most efficient way to operate the business.
Example
An insurance company combines with a shipping and cargo company to form a new
business is an example of a mixed combination.
Horizontal Combination
A horizontal combination comes into being when units carrying on the same trade or
pursuing the same productive activity join together with a common end in view.
Vertical Combinations
Vertical integration is the combination of firms in successive stages of the same industry. It
implies the integration of various processes of an industry.
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Lateral Combination
Lateral integration refers to the combination of those firms which manufacture different
kinds of products though they are ‘allied in some way.’
Diagonal Combination
It is also called ‘Service’ integration Diagonal integration comes into existence when a unit
providing auxiliary goods and services to industry is combined with a unit engaged in the
mainline of production, within the organization.
Circular Combination
When firms belonging to different industries and producing altogether different products
and combine under the banner of a central agency, it is called a mixed or circular
combination.
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