Reasons (Aims/Objectives) for merging/integration
- To expand the market in form of increased sales resulting from large production.
- To ensure efficient management, that is, different firms can combine different management skills which enable them to operate more effectively and efficiently.
- To reduce on the risks involved in business operations. This is because under mergers risk bearing economies of scale can be enjoyed through diversification in production.
- To monopolize business activities. When a number of firms combine to form one large firm, they can outcompete other small firms hence enjoying the monopoly power.
- To increase employment opportunities. A number of business activities are created due to large scale of production hence more employment opportunities.
- To increase resource utilization. A combined big firm can be able to raise more capital in order to increase on the utilization of resources and produce more goods and services, in case small firms have been operating at excess capacity.
- To ensure reliable supply of raw materials. For example when one firm is using bi-products of another firm as its source of raw materials.
- To increase on the profits of each firm within the merger due to the large scale of operation of the merger.
- To ensure increased quality and quantity of output. For example, through joint research, firms can be able to improve on the quality of their products.
- To promote specialization in production. Each firm under the merger can specialize in producing a given product. This increases the efficiency and output of each firm.
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CATEGORIES Economics
TAGS Dr. Bbosa Science
The notes are good and summarised which makes them easy to read
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