Horizontal Integration

Horizontal integration has four sources of value creation: reduction in competitive intensity, lower costs, increased differentiation, and access to new markets and distribution channels. This activity is important because horizontal integration can provide a firm several benefits or advantages. This activity is based on four well-known mergers or acquisitions that led to horizontal integration, and each is discussed in greater detail in Chapter 9 of your text.

The goal of this exercise is to identify the advantages and disadvantages of horizontal integration based on the following descriptions:

American Airlines - U.S. Airways merger: Reduced excess capacity.

Pfizer Wyeth merger: Allowed for a reduction in sales forces and overall cost of distribution.

Disneys acquisition of Marvel: Allowed Disney to offer a wider line-up of superheroes.

Krafts acquisition of Cadbury: Allowed Kraft to leverage access to India, Egypt, Thailand, and fast-growing markets in Latin America.

Complete the following activities.

Match each company name to the benefit of horizontal integration it exemplifies.

1. Increased Differentiation
2. Lower Costs
3. Access to New Markets and Distribution Channels
4. Reduction in Competitive Intensity

Match each of the options above to the items below.

• American Airlines - U.S. Airways merger

• Pfizer Wyeth merger

• Disneys acquisition of Marvel

• Krafts acquisition of Cadbury