Business Studies

By: Anshuman, Metis, and Harsh

Horizontal Integration
It is when one firm merges, takes over or purchase of another firm in the same
industry at a synonymous stage of production.

This process can result increased production of goods and services ,having bigger
share ,reduces the number of competitors in the industry, international trade and
bigger market size but it can face some problem like antitrust issue and reduction
in overall value of the firm.

Example - Heinz and Kraft merge together so the both get bigger production.
Conglomerate Integration
Conglomerate Integration is when a merger between firms with completely
contrastive business activities, merges or gains control over one of the firms.
There are two types of conglomerate mergers: pure and mixed.

● Pure conglomerate merger – the parties have absolutely nothing in

common

● Mixed conglomerate merger – the parties seek to expand their market

regions, or to extend their product offerings

Anshuman
Conglomerate Integrating Pros
This form of merging is quite risky, therefore there are only a few concrete benefits for this type of
merging.

One benefit of a conglomerate merger is that both companies reach a larger target audience. For
example, if company A merges with company B, both companies share the same market base,
allowing them spread their operations.

Prior to the merge, each company would have only been able to target their own areas of the
market, but after the two companies combined, they shall obtain a much further reach for their
customers, allowing for growth and cross referencing between potential clients and businesses
alike.

In business and finance alike, diversification is key, however it can gravely affect your business
depending on the firm you merge with. There is less risk, as the factors are spread out through
different avenues, allowing the company to overcome any potential failures that may arise. -
Anshuman
Conglomerate Integration Cons
Diversification can sometimes be a downfall for certain companies, since spreading their organisation
across too many areas, can lead to little attention for each junction and possibly an unorganised conduct
of management.

An example of this, is if one conglomerate involved in the merger had an excessively strong hold over the
other conglomerate. This type of bond can be also be detrimental, since it limits the newly formed
business options in the market.

Along with this is the disadvantage of controlling and managing such a large business.

When these companies combine, they merge all past customers with differing accounts. The bureaucracy
needed to take care of this can be a detriment to the new conglomerate. Regardless, the structure of the
company will be changed, creating potential problems along with the advantages.- Anshuman
Examples:
One major example of Mixed Conglomerate Integration was the merge between
the Walt Disney Company and the American Broadcasting Company. This
decision was quite sensible, since the Walt Disney Company must have been
trying to extend their business and commercialise their corporation with the
American Broadcasting Company, which is also a significant brand.

An example for Pure Conglomerate Integration would be if a Fast Food company

were to try and combine with a very different form of industry such as an Audio or
a Cellular company. They may have very different objectives, but with each name
of the company promoting each other, they can either receive additional
customers or lose customers due to a senseless merge. - Anshuman