ECO 401 GDB SOLUTION
Concept: The merger between the Mobilink and Warid telecom is called the Horizontal merger.
In the horizontal merger two firms in the same industry form one large company, usually the bigger firm swallow the smaller one .in our case this is the Mobilink the bigger firm swallow the smaller firm like the Warid.
Companies in the this case are the direct competitors in the industry .
Definition:
Horizontal merger are those merger in the market structure in which the firms producing the similar kinds of the commodities or running the similar business merge with the one another.
Second Definition:
Horizontal merger are those merger in which the two companies operating in the same industry and geographically in the same area merge with each other instead of competing with one another under the horizontal merge they just become one entity.
Advantages of the Horizontal Merger
1. Reduction in Rationalization
The biggest advantage of the horizontal merger is that I will reduce the industrial competition between the Mobilink and the Warid Telecom in the telecommunication industry as the company being one entity will reduce the undue stress how to tackle competition and concentrate on the more of the improving of their services and products and giving the costumers the best services by giving it at low prices in the market.
2. Increase market shares
Through reduction in the competition there will be an increase in the market shares, revenues and profits between the Mobilink and Warid Telecom.
3. Reduce costs
From the costumers point of view it will be the bigger network and better coverage while at the same time reducing the numbers of the stations and the sites, which will reduce the cost of the production and will good for both of the companies in the industry.
4. Economies of Scales.
.The horizontal merger will give the two companies the benefit of the economies of the scale because as the size of the company increases the price per unit of the production decreases as there will be the elimination of the duplications of the machinery, increase in the bargaining power of the two companies due to the increase size of the merge companies.
There will be the less expenditure on the advertising and publicity leading to company delivering the product at the lower price to its costumers than before.
5. Diversifications
The merged company will be able to capture the more consumers than they would as an individual entities e.g. Mobilink and Warid .There will be the great range of the prices options presented to the consumers at the point of the sale.
6. Better Management
It will be easier for top management of the acquiring company to manage the target company which is in the same business rather than acquiring taking over that company which has completely different business and hence chances of top management successfully handling both the companies increases in case of horizontal merger.
