Question

Given that many mergers and acquisitions fail, why do you think that executives keep making horizontal integration moves?

Answer 1

There have been studies on mergers and acquisitions, success from which have been few but still executives look toward horizontal integration is due to the fact that it is a pathway to so many benefits that executives want to reap. Horizontal integration, first of all, provides cost effectiveness by achieving economies of scale which means less cost per unit and more profits. Also horizontal integration clears the way and eases the competition as one of the competitors join hands with the other and both focus together on achieving the same goal. One of the more appealing points to consider for horizontal integration is that it paves the way to easier and smoother distribution to markets unreachable before. For instance, if a Tennessee company merges with a new jersey company and starts distribution there, they'd be able to tap those markets which they couldn't before.

All the above mentioned points describe the motive behind choosing horizontal integration.