Enterprise, business growth and size — practice questions

Type: Vertical backward integration — controls content supplier (upstream).

Benefits: Secure exclusive shows, cost control, quality coordination, barrier to rivals lacking content.

Risks: $ billions purchase (5.2, 10.3); culture clash creative vs tech; regulator antitrust if too dominant (6.1.1 political/legal).

vs horizontal: Not buying rival streamer — different strategic logic.

Evaluate: Strong if content is bottleneck; weak if overpaid or creatives leave.

This is an example of horizontal integration as both firms are competitors at the same stage of the supply chain.

Step 1: Calculate the combined sales of the new merged business. Combined Sales = FreshMart Sales + GroceryPlus Sales Combined Sales = $80,000,000 +$70,000,000 = $150,000,000$

Step 2: Calculate the new market share. Market Share = (Combined Sales / Total Market Sales) × 100 Market Share = ($150,000,000 /$500,000,000) × 100 Market Share = 0.3 × 100 = 30%

Analysis of a Benefit: A key benefit is achieving economies of scale. With a larger market share (30%), the merged company has increased purchasing power. It can negotiate lower prices from suppliers by buying in bulk, which reduces its average costs. This cost saving can be used to lower prices for customers to gain a competitive advantage, or be kept as higher profit for shareholders.