Question

Which of the following is a disadvantage of a horizontal integration corporate strategy?

A. It increases competitive intensity within an industry.
B. It increases the potential for legal repercussions.
C. It increases the costs associated with increasing value.
D. It increases the threat of new entrants in an industry.

Answer 1

A disadvantage of horizontal integration is that it increases the potential for legal repercussions due to antitrust scrutiny, which can lead to costly legal challenges and possibly reversing mergers or acquisitions.

Step-by-step explanation:

One disadvantage of a horizontal integration corporate strategy is that it increases the potential for legal repercussions. This strategy, which involves mergers or acquisitions between companies that operate at the same level of the production process, often faces close scrutiny from antitrust authorities. Regulators may view horizontal integration as potentially detrimental to competition, as it can lead to market consolidation and reduce the number of competitors.

While horizontal integration can lead to economies of scale and increased market power, the risk of legal challenges related to antitrust laws is significant. Such legal challenges can be costly and time-consuming, and they may even result in the reversal of the merger or acquisition.