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to sell its goods or services above petitive levels or – when the costs of its primary or support activities are below those of its petitors – usually is derived from the size of the firm and its resources and capabilities to pete ? Market power is increased by – horizontal acquisitions – vertical acquisitions – related acquisitions Increased Market Power 5 Reasons for Making Acquisitions: ? Barriers to entry include – economies of scale in established petitors – differentiated products by petitors – enduring relationships with customers that create product loyalties with petitors ? acquisition of an established pany – may be more effective than entering the market as a petitor offering an unfamiliar good or service that is unfamiliar to current buyers – provides a new entrant with immediate market access Overe Barriers to Entry 6 Reasons for Making Acquisitions: ? Significant investments of a firm’s resources are required to – Develop new products internally – introduce new products into the marketplace ? Acquisition of a petitor may result in – more predictable returns – faster market entry – rapid access to new capabilities Cost of New Product Development and Speed to Market 7 Reasons for Making Acquisitions: ? An acquisition’s outes can be estimated more easily and accurately pared to the outes of an internal product development process ? Therefore managers may view acquisitions as lowering risk Lower Risk Compared to Developing New Products 8 Reasons for Making Acquisitions: ? It may be easier to develop and introduce new products in markets currently served by the firm ? It may be difficult to develop new products for markets in which a firm lac