Question

Funtech is a toy manufacturer. It wants to form a merger with one of the toy stores that buys its toys. This would be a __________ merger.

Vertical Horizontal Conglomerate Market extension

Answer 1

The right answer is :-

Vertical

Explanation :-

Vertical merger is the merger of any company with another company in order to procure supplies directly from another company or to control the distribution of products. In this case, Funtech , a toy manufacturer wants to form merger with a toy store that buys its toys , so Funtech wants to control its retail or distribution of toys so, it is a case of vertical merger.

Explanation for rejection of other points :-

Horizontal merger is between the companies that operate in same industry , sells same kind of products and this merger is done in order to reduce competition and achieve economies of scale and increase market share.

Conglomerate merger is merger between companies that are unrrelated to each other in business activities.

Market extension is a merger in which two companies operating in different geographical regions merge to become one big company to access to bigger market and improve customer base.