SGMT 3000 Lecture Notes - Lecture 9: Horizontal Integration, Vertical Integration, Market Power

• School: York University
• Department: Strategic Management
• Course: SGMT 3000
• Professor: Stan Xiao Li

Document Summary

Staying in one industry means all technological, financial and capabilities can be focused on competing in one area (important in rapidly changing industries) Stays in the industry it performs well in: new competitors entering industry due to advances in technology or changing customer needs can create challenges. Benefits of horizontal integration: lower cost structure. Increased economies of scale important in industries where fixed costs are high (ie telecommunications) Sometimes the basis for acquisition is to get access to another"s firms products combined price. Problems with horizontal integration: challenges, merging different company cultures, high management turnover in the acquired company, management overestimating benefits of a merger or acquisition, underestimating the problems involved with merging. Issues with the ftc (federal trade commission) or department of justice: antitrust authorities are concerned with abuse of market power want to make sure competition is still present to help control prices for the consumer.