Practice Quiz

Case Interview Prep

Category - Economics

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MBC Electronics is a strong-performing firm that has reported high profits in 10 consecutive quarters. Investors, however, see merit in a merge with a larger manufacturer to offset the competitive force of nation-wide chains. This merger is an example of a(an):
  1. external expansion
  2. vertical integration
  3. internal expansion
  4. management integration
Explanation
Answer: A - This merger is an example of an external expansion.

Key Takeaway: Mergers and takeovers are considered external expansions. Companies engage in external expansion for a number of reasons including to become more competitive, to gain access to new markets, and to increase efficiency and lower overhead.
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