Horizontal Merger and Why it is Beneficial

Horizontal Merger

Horizontal merger happens when two companies essentially involve in the same service or product merge to enhance their combined value. In this case, a company decides to integrate or take over another company at the same production stage or in the same industry for instance the merger of Mobil and Exxon or the acquisition of Pixar by Disney. In the two examples the two involved companies of similar operation and size, working in the same industry are integrated to create a stronger and more powerful company (Roberts, Wallace & Moles, 2015).

Benefits of Horizontal Merger

There are various benefits associated with horizontal integration.  Horizontal merger gives them involved company a chance to expand and achieving reduction of competition since the expansion will provide it with higher operation power, production cost reduction, increase of market share or market power, achieve economic of scope and economic of scale. Thus, the organization will be able to reduce the price of its product due to the attained economic of scale and reduced cost of production and hence increasing its competitive advantage.

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Effective integration will also ensure combination of two workforces with different level of creativity, culture, ideas and mode of problems solving. When well integrated, the workforce can promote the development of a strong workforce with high ability to define high level of creativity and new skills to enhance high quality product   or services. This also adds to improving the organization competitive advantages (Gal-Or, 1988).

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