Integration and rationalisation

Question 1

Horizontal integration ao1

Answer 1

Occurs when a business merges or takes over another in the same industry or at the same stage in the production process

Question 2

Advantages of horizontal integration

Answer 2

• exploit internal economies of scale
• cost savings
• removes key rivals
• synergy

Question 3

DisAdvantages of horizontal integration

Answer 3

• risk of diseconomies of scale
• investigation by CMA
• culture clashes

Question 4

Vertical integration ao1

Answer 4

When a business merges with or takes over a business at either the previous or next stage in the production process

Question 5

Advantages of vertical integration

Answer 5

• backwards means more control over quality
• forwards means firms closer to consumers- can respond to trends quicker

Question 6

Disadvantages of vertical integration

Answer 6

• need for more skill or specialisation
• initial capital outlay

Question 7

Rationalisation ao1

Answer 7

The reorganisation of a business in order to increase its efficiency