Question:medium
‘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:
‘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:
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Vertical Merger = Supplier + Manufacturer
Think: Control over supply chain = Vertical Integration.
Updated On: Jan 14, 2026
- Market Extension Merger
- Vertical Merger
- Horizontal Merger
- Product Extension Merger
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The Correct Option is B
Solution and Explanation
A Vertical Merger is the consolidation of two companies operating at different levels of the production chain within the same industry. In the provided scenario:
Bharat Cars Ltd., a finished product manufacturer (small cars).
Swadeshi Ltd., a component supplier (car parts).This combination qualifies as a Vertical Merger because one entity supplies inputs for the other's final product. Such mergers enhance cost control, streamline supply chain management, and guarantee consistent input availability for the buyer.Alternative classifications:
Market Extension Merger: Companies in distinct markets combine.
Horizontal Merger: Involves companies at the same production stage (e.g., two car manufacturers).
Product Extension Merger: Companies offering related products in the same market merge.Therefore, the appropriate classification is (B) Vertical Merger.
Bharat Cars Ltd., a finished product manufacturer (small cars).
Swadeshi Ltd., a component supplier (car parts).This combination qualifies as a Vertical Merger because one entity supplies inputs for the other's final product. Such mergers enhance cost control, streamline supply chain management, and guarantee consistent input availability for the buyer.Alternative classifications:
Market Extension Merger: Companies in distinct markets combine.
Horizontal Merger: Involves companies at the same production stage (e.g., two car manufacturers).
Product Extension Merger: Companies offering related products in the same market merge.Therefore, the appropriate classification is (B) Vertical Merger.
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