The history of the current issue is that PepsiCo, Inc, and the Quaker Oats
Company issued a joint press release about the decision to merge. The merge says that
Pepsi would get Quaker Oats in a stock for stock deal valuing Quaker at around 14
million dollars. After this announcement observers saw this merge as another set back for
Coca-Cola. If Pepsi gets this deal on then it would be gaining control of 83.6 percent of
the soft drinks. This is really a good deal to Pepsi and it will open the opportunity to its
other product like Gatorade. PepsiCo has already gained control tremendously well-built
brands in the noncarbonated-beverages sector. Some of the drinks that have gained
control are Aquafina, Tropicana, and Lipton, it would consolidate on Gatorade.
Some
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The difference between horizontal and vertical integrations is that vertical
integration typically expands into another product stage rather than merging or acquiring
the company in the same production stage. For example a company is vertically
integrating if it expands from manufacturing industry to retailing industry. In the other
hand Horizontal Integration would mean buying other firms in the same manufacturing
industry.
Advantages of horizontal integration are lower cost, in a large company like
Quaker and PepsiCo that produces more products world wide. The higher output leads to
better economies of amount and higher competence. It also add to differentiation, once
products are joint there is more to offer in terms of product features, customers have a
wide range of choice. It also increases the market power; the larger company has more
power over its suppliers, distributors, and consumers. Competition is bargained, this is
because the companies that were on the same level contribution same kind of products
have consolidated and are working together, and this lessens the intense competition