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International trade barriers

As trade barriers have fallen in the EU, many experts expect to see more mergers between firms in Europe. What effect if any will this have on competition with Canadian and US firms? To what extent is your answer industry dependent?

Solution Summary

The solution goes into a considerable amount of detail to answer the question below. The solution explains how, by merging, European companies will become large quickly. Previously fragmented industries may consolidate into larger and stronger competitors. Production stands to increase and operating costs stand to decline. The companies will seek to achieve this through economies of scale and scope. This will allow some of the cost advantage to be passed along to the consumer. Their new consolidated share should also lead to greater profitability as growth and profitability are positively correlated. Towards, the end, the response also talks about product homogeneity and industries. Overall, an excellent response to the answer.

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