Thursday, October 17, 2019

According to Airbus the merger between BAE Systems and EADS was the Essay

According to Airbus the merger between BAE Systems and EADS was the last chance of creating a European aerospace and defence giant - Essay Example Production can be organized in three different ways (Craig and Campbell 114). Firms diversify in various means. They integrate vertically, horizontally or agglomerate. Vertical integration involves mergers of firms in the vertical; line of production. A firm can merge with other firms up or down the line of production. Mergers up the line of production are called forward vertical integration while mergers down the line of production, the backward vertical integration. Horizontal integration involves mergers between firms at the same level of production. Conglomerate integration involves the merging of companies in different line of production. The benefits of the above diversification methods are that firms are able to improve their performance hence growth and increase in capacity. They increase their market shares, synergies, and due to large-scale production, they realize economies of scope and economies of scope. Low production costs lead to maximized profits. This study examines the impact of mergers and acquisition on the performance of BAE systems. Diversification is the process through which an organization enters new processes of business in the market with the possibility of manufacturing new products. Mergers and acquisitions are a form of entry that a firm may use to enter a market. Many firms in the financial industry have utilized this means to enter new markets. Mergers and acquisitions can take the form of vertical integration, horizontal integration or conglomerates. Horizontal integration is a form of integration in which firms combine at the same stage of production. Ison and Griffiths (75) note that horizontal integration may help a certain company to increase their share value. Firms that undertake horizontal integration do benefit from economies of scale that result from capacity expansion, technical economies of scale,

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