Final answer:
Purchasing competing firms to increase market share and profits is known as horizontal integration. It involves a company merging with or acquiring another company at the same level in an industry, and it can lead to various economic benefits but is regulated under antitrust laws to prevent monopoly formation.
Step-by-step explanation:
Purchasing competing firms in order to increase market share and profits is known as horizontal integration. This business strategy involves a company merging with or acquiring another company that operates at the same level in an industry and often produces the same or similar products. This move can lead to business growth, increased efficiency, the acquisition of new product lines, the elimination of competition, or the loss of a corporate identity, ultimately aiming to enhance market position and profits.
The two main types of mergers are horizontal mergers and vertical mergers. A horizontal merger is precisely aligned with the concept of horizontal integration. On the other hand, a vertical merger involves companies at different stages of production joining together, often to secure supply chains and streamline the manufacturing process. Both types of mergers and acquisitions may be subject to regulation under antitrust laws, which aim to prevent the formation of monopolies and ensure active competition within markets.