Which external growth method involves two or more firms forming a new organization and losing their original identities?

Which external growth method involves two or more firms forming a new organization and losing their original identities?

• A. Joint Venture
• B. Franchise
• C. Market Development
• D. Merger

Answer: (D)

Mergers occur when two or more firms decide to combine to operate as a single new entity. The defining feature is that the original companies lose their separate identities and form one fresh organization, often with a new name. This contrasts with other external growth options: a joint venture creates a separate company owned by two firms while each parent retains its own identity; a franchise is a licensing arrangement letting an independent operator run a proven business model; and market development is about expanding into new markets rather than combining firms.

Mergers occur when two or more firms decide to combine to operate as a single new entity. The defining feature is that the original companies lose their separate identities and form one fresh organization, often with a new name. This contrasts with other external growth options: a joint venture creates a separate company owned by two firms while each parent retains its own identity; a franchise is a licensing arrangement letting an independent operator run a proven business model; and market development is about expanding into new markets rather than combining firms.