Which external growth strategy occurs when a firm acquires or merges with another at the same stage of production, such as two banks merging?

• A. Franchise
• B. Market Development
• C. Horizontal Integration
• D. Merger

Answer: (C)

This examines external growth through combining firms at the same production stage. Horizontal integration happens when two or more companies in the same industry and at the same point in the value chain merge or one acquires the other. Two banks merging is a classic example because both are financial service providers operating at the same level, so the growth comes from reducing competition and increasing market share within the same industry. Franchising is about expanding via licensing a business model, not merging with another firm. Market development involves selling existing products in new markets, not combining with a peer. A merger is a general term for combining firms, but the specific idea described here is the growth by joining with a competitor at the same stage, which is horizontal integration.