Business Growth Strategy - Horizontal and Vertical Integration Week 2 Discussion Mergers and acquisitions are ways in which firms can generate growth measured by expectations of higher profits and linked to higher profits is expected higher stock values. Growth in profits in mergers and acquisitions arise through gains: in economies of scale; gains in economies of scope; and, sometime by gains in both economies of scale and scope. What is the difference between an economy of scale and an economy of scope? The video features four recent but very different mergers/acquisitions. Use one of these and explain: was the merger/acquisition predominately about gaining economies of scale or economies scope? OR Identify a recent merger/acquisition and use it to and explain: was the merger/acquisition predominately about gaining economies of scale or economies scope? PLEASE DO NOT RELY ON WIKIPEDIA, INVESTOPEDIA OR ANY OTHER PEDIA AS A REFERENCE AT ANYTIME IN THIS COURSE. Rules for credit in the discussion: Your Pin, the presentation of your solution to the above, 120 words required for full credit of 10 points.B Click the large Yellow Button Pin + Comment/Reply to 2 other participants, 30 words each required for full credit of 5 points each. Extra Credit, up to 5 points extra credit may be earned for additional comments/reply.B This is the only extra credit available in the course. 30 words response required Student A What is the difference between an economy of scale and an economy of scope? Froeb, McCann, Shor, & Ward (2018) describes economy of scales happens when cost fall as a result of increases in output. In contrast, economy of scope happens if two products are produced in conjunction to reduce the cost if the products were produced separately (Froeb, et al, 2018). The video features four recent but very different mergers/acquisitions. Use one of these and explain: was the merger/acquisition predominately about gaining economies of scale or economies scope? Based on the above definitions and the video, the example of Ikea would be a business who completed an acquisition to increase their economy to scale. The company did a backward integration, in which they acquired forest from their suppliers as well as the resources to produce material for their product lines. This broadened their ability to control the supply chain, and enable direct control over the cost of manufacturing and production outputs (Riley, N.D.) References Froeb, Brian, L.M., McCann, T., Shor, M., Ward, M.R. (2018). Managerial Economics, Fifth Edition. Boston, MA. Cengage Learning. Riley, J. N.D. Business Growth Strategy, Horizontal and Vertical Integration. Retrieved from: https://youtu.be/uOO4ClVUrkw. 8 Oct 18. 30 words response required Student B Identify a recent merger/acquisition and use it to and explain: was the merger/acquisition predominately about gaining economies of scale or economies scope? Coach/ Kate Spade merger that took place in May 2017 shook up the fashion industry. This deal was done in effort to reach younger consumers and rebrand itself as a broader "lifestyle assortment company." The combination of Coach and Kate Spade creates a leading luxury company with a more diverse multi-brand portfolio featuring handbags, merchandising, supply chain and retail operations. Coach's history and heritage, international distribution and leadership team will drive long term growth for the Kate Spade brand. I think this merger was about gaining economies scope. By buying the Kate Spade brand Coach would lower the prices of some of their products because they would be producing more types of products. This would work well for advertising to the young consumers. Nasdaq.com businesswire.com https://businesswire.com
Purchase answer to see full attachment