What term describes the practice of a company buying all of its direct competitors to create a monopoly?

What term describes the practice of a company buying all of its direct competitors to create a monopoly?

• A. Franchise
• B. Globalization
• C. Horizontal Integration
• D. Vertical Integration

Answer: (C)

Purchasing all of a firm’s direct competitors in the same market is horizontal integration. This occurs when a company merges with or acquires other firms at the same stage of production within the same industry, boosting market share and reducing competition. By bringing rivals under one umbrella, the company can gain pricing power, achieve economies of scale, and strengthen its dominance. This differs from vertical integration, which involves acquiring firms at different stages of the supply chain (like suppliers or distributors). Franchising is a licensing arrangement for distributing a brand and business model, not about buying competitors, and globalization refers to expanding operations into new international markets rather than consolidation within a single market.

Purchasing all of a firm’s direct competitors in the same market is horizontal integration. This occurs when a company merges with or acquires other firms at the same stage of production within the same industry, boosting market share and reducing competition. By bringing rivals under one umbrella, the company can gain pricing power, achieve economies of scale, and strengthen its dominance. This differs from vertical integration, which involves acquiring firms at different stages of the supply chain (like suppliers or distributors). Franchising is a licensing arrangement for distributing a brand and business model, not about buying competitors, and globalization refers to expanding operations into new international markets rather than consolidation within a single market.