WAYS / METHODS OF BUSINESSES TO REDUCE COMPETITION

POOL – When companies in the same industry agree to charge the same price for the same product (price fixing) OPEC (Organization of Petroleum Exporting Countries) Fancy Definition: Group of related financial instruments, such as mortgages, combined for resale to investors on a secondary market.

MONOPOLY / TRUST (broad terms) – when one company dominates an industry John D. Rockefeller had a monopoly over the oil industry

MERGER – When one company is absorbed by another company Ex: Disney bought Pixar Fancy Definition: The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock.

CONSOLIDATION – When two or more companies come together to form a BRAND NEW company Ex: AOL Time Warner Fancy Definition The combining of separate companies, functional areas, or product lines, into a single one. Differs from a merger in that a new entity is created in the consolidation.

The process of maturation in some markets whereby smaller companies are acquired or run out of business, leaving only a few dominant players.

THREE ASPECTS OF INDUSTRY – 1. Raw Materials – 2. Manufacturing – 3. Distribution

HORIZONTAL INTEGRATION – When one company dominates one aspect of an industry Rockefeller dominated the manufacturing of oil (oil refineries) Example = a hot dog vendor expanding into selling hamburgers

VERTICAL INTEGRATION When one company owns a small bit of at least two aspects of industry (they can undercut the competition) – Ex: American Apparel – Music industry – Oil Industry – Software Example = a car company that is expanding into tire manufacturing