Which phrase best describes a corporate strategy where a firm acquires its competitors to create a single, larger entity?

Which phrase best describes a corporate strategy where a firm acquires its competitors to create a single, larger entity?

• A. Vertical Integration
• B. Diversification
• C. Market Consolidation
• D. Horizontal Integration

Answer: (D)

Horizontal integration is when a company buys or merges with rivals operating at the same level in the industry to form a larger, single entity. This moves the firm to gain greater market share, achieve economies of scale, and reduce competition, which can lead to stronger pricing power and more efficient operations through shared resources and distribution networks. Vertical integration would involve taking on firms at different points in the supply chain, such as suppliers or distributors, not competitors in the same market. Diversification means entering new, often unrelated lines of business, which spreads risk but isn’t about consolidating rivals in the same industry. Market consolidation describes the outcome of having fewer competitors in a market, but the strategic move of acquiring rivals to create a larger entity is best captured by horizontal integration.

Horizontal integration is when a company buys or merges with rivals operating at the same level in the industry to form a larger, single entity. This moves the firm to gain greater market share, achieve economies of scale, and reduce competition, which can lead to stronger pricing power and more efficient operations through shared resources and distribution networks.

Vertical integration would involve taking on firms at different points in the supply chain, such as suppliers or distributors, not competitors in the same market. Diversification means entering new, often unrelated lines of business, which spreads risk but isn’t about consolidating rivals in the same industry. Market consolidation describes the outcome of having fewer competitors in a market, but the strategic move of acquiring rivals to create a larger entity is best captured by horizontal integration.