-+ Automatic Zoom Problem 1: Mergers Label the following as horizontal, vertical
ID: 1121579 • Letter: #
Question
-+ Automatic Zoom Problem 1: Mergers Label the following as horizontal, vertical, or conglomerate mergers. a) Boeing merges with Airbus. b) HP mergers with Compaq. c) The Olive Garden buys Prego spaghetti sauce. d) McDonald's buys the Olive Garden e) Microsoft buys Intel. f) What implicit assumptions about market definitions did you have to make in each case? What would lawyers for the government probably argue if they were contesting a merger? What would the lawyers for the companies involved argue?Explanation / Answer
A.
Horizontal Merger
B.
Horizontal Merger
C.
Vertical Merger
D.
Horizontal Merger
E.
Conglomerate Merger
F.
For case A, both Boing and Airbus compete in the one industry and offer the similar product. Hence, it is horizontal merger. For case B, HP and Compaq both offer personal computing solutions, hence it is horizontal merger. For Case C, Prego Spaghetti Sauce is one of the ingredient or material used in Olive garden restaurant products. Hence, it is vertical integration. For case D, McDonalds and olive garden are the fast food restaurant chains. Hence, it is horizontal merger. Intel and Microsoft are into the unrelated business as Intel makes chipsets and Microsoft produce OS and office applications.
Lawyers of the government will give the following arguments:
A. It will increase the market concentration creating a scope of market power
B. It will facilitate the anti-competitive practices
C. The mergers will create hindrance to the fair competition
D. Anti-trust scenario will be developed.
Lawyers of the companies will give following guidelines:
A. It will bring efficiency in operation.
B. Economy of scale and scope will be created, ultimately benefiting to the consumers.
C. Technological know-hows will be shared for the growth of the next level.
D. Operational efficiency will be achieved.
E. Capital will complement the human resource after the merger.
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