Question

Firms will make acquisitions to _____, which is particularly important in markets that are rapidly globalizing.

Select a response.
a. maximize the exposure to risk and therefore profit
b. avoid government regulations on the environment and labor
c. preempt competitors

Answer 1

The correct answer is option c. Firms make acquisitions to preempt competitors and maintain a competitive edge in rapidly globalizing markets. Strategic acquisitions allow firms to achieve economies of scale, secure market share, and access new technologies and markets. While firms normally have the freedom to make such moves, antitrust laws can regulate or prevent mergers or acquisitions that threaten competition.

Step-by-step explanation:

Firms will make acquisitions to preempt competitors, which is particularly important in markets that are rapidly globalizing. In a market-oriented economy, private firms have the freedom to expand or reduce production, set prices, open or close facilities, hire or lay off workers, and start or discontinue selling products. Making acquisitions might be a strategic choice to maintain a competitive advantage, secure market share, or gain access to new technologies and markets before competitors do. Furthermore, through acquisitions, firms potentially achieve economies of scale and scope, leading to business growth and expansion, while consolidating their position in the global market.

Such business decisions are made under the presumption that firms are in the best position to make the most profitable choices for themselves, without excessive governmental intervention. However, governments may enact antitrust laws to promote competition and prevent the creation of monopolies through such mergers and acquisitions.

Answer 2

Firms acquire other companies to preempt competitors, which is a strategic move to gain market advantage, particularly in global markets. Such acquisitions may allow firms to diversify, gain efficiencies, reduce competition, and quickly scale their operations.

Step-by-step explanation:

Firms make acquisitions to preempt competitors, which is particularly important in markets that are rapidly globalizing. In a market-oriented economy, firms are granted the freedom to make strategic decisions such as acquisitions. This often involves one firm buying another, either as a merger or as a takeover. These moves can be strategic in several ways, such as gaining access to new markets, acquiring new technology or products, or consolidating market power to better compete against rivals.

This kind of strategic growth is often essential in maintaining a competitive edge. It allows the acquiring firm to rapidly scale up its operations, tap into new customer bases, and potentially reduce competition in the market. Firms may also acquire to diversify their portfolios or to gain synergies that can lead to increased efficiency and reduced costs. Therefore, preemption of competitors is a key motive behind acquisitions, enabling firms to maintain or establish market leadership in an increasingly competitive and globalized business environment.