Two businesses at the same stage of production merge to become one.

• A. External Growth
• B. Horizontal Integration
• C. Diversification
• D. Mergers

Answer: (B)

Horizontal integration is when two firms operating at the same stage of production join forces to grow. By merging with a competitor, the new, larger business can win a bigger share of the market, reduce competition, and gain economies of scale like lower costs per unit and stronger bargaining power with suppliers. This is a form of external growth, since the boost comes from combining with another business rather than expanding on its own. It differs from diversification (entering different product areas) and from vertical integration (taking over a different part of the supply chain).