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Imagine a world where….

Imagine a world where…. McDonalds, Burger King, and Wendy’s joined together to create one fast food company known as McWendy King. How might this “joining of forces” impact the new McWendy King company? How might this “joining of forces” impact you?. Mergers & the Role of Government.

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Imagine a world where….

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  1. Imagine a world where…. McDonalds, Burger King, and Wendy’s joined together to create one fast food company known as McWendy King. • How might this “joining of forces” impact the new McWendy King company? • How might this “joining of forces” impact you?

  2. Mergers & the Role of Government

  3. Mergers • When two or more companies combine their operations • Sometimes called a “buy out” if a larger company merges with a much smaller company • Reasons • Expand business • Become more efficient • Eliminate rivals

  4. Horizontal Merger • Businesses that make the same type of product join together • JP Morgan Bank & Chase Bank = JP Morgan Chase • United Airlines + Continental Airlines = United Continental

  5. Vertical Merger • Companies that contribute to the production of one product join together • McDonalds joins with Idaho Potato and Kosher Salt • What product do they contribute to making? • French fries!

  6. Impact of Mergers • Reduces competition • Prices can increase • Possibly fewer product choices • Market structure shifts closer to a monopoly • Makes production more efficient • Prices can decrease • Products can be better

  7. Role of Government • Enforce anti-monopoly laws • Ensure no one company has too much control • Ensure competition is fair • Prevent mergers that create unfair/uncompetitive markets • Regulate natural monopolies • What are those? • Monitor price changes • Ensure they aren’t taking advantage of consumers

  8. Quick Review • When companies from the same industry join together, this is known as a ______________ merger • How can mergers be a good thing for consumers? • How can mergers be a bad thing for consumers? • What roles does the government have in controlling market structures? horizontal Better efficiency = lower prices, better products Reduces competition= higher prices, fewer products available Enforce anti-monopoly laws, regulate natural monopolies

  9. Add to your Business Plan Which companies would your business merge with if it conducted a: • Horizontal merger • Vertical merger

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