Question

‘Bharat Cars Ltd.’ is the manufacturer of small cars in India and ‘Swadeshi Ltd.’ is the manufacturer and supplier of car parts. Both the companies decide to merge as such a merger would allow ‘Bharat Cars Ltd.’ to obtain better pricing on parts and have better control over the manufacturing process. ‘Swadeshi Ltd.’ would also be guaranteed a steady stream of business.

The type of merger is ______.

Options

• Market Extension Merger

• Vertical Merger

• Horizontal Merger

• Product Extension Merger

Answer 1

‘Bharat Cars Ltd.’ is the manufacturer of small cars in India and ‘Swadeshi Ltd.’ is the manufacturer and supplier of car parts. Both the companies decide to merge as such a merger would allow ‘Bharat Cars Ltd.’ to obtain better pricing on parts and have better control over the manufacturing process. ‘Swadeshi Ltd.’ would also be guaranteed a steady stream of business.

The type of merger is vertical merger.

Explanation:

The case concerns a joint venture between Bharat Cars Ltd., which manufactures cars, and Swadeshi Ltd., which sells automotive components. Because Swadeshi Ltd. is a supplier to Bharat Cars Ltd., this merger is meant to get better prices on parts and more control over the making process. When a company partners with its supplier or distributor to reduce costs, improve efficiency, and ensure it always has the supplies it needs, this is called a vertical merger.