Horizontal Integration

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Acquiring business activities at the same level of the value chain. Explanation of Horizontal Integration.

Contributed by: Ed Walters

Contents

  1. Summary
  2. Forum
  3. Best Practices
  4. Expert Tips
  5. Resources
  6. Print

Horizontal Integration

What is Horizontal Integration? Description

Like its counterpart, Vertical Integration, Horizontal Integration is a potential strategic move which a firm may consider. Horizontal Integration means to acquire business activities at the same level of the value chain. This can mean:

  • Acquiring activities dealing with similar products, so that synergies accrue and there is a degree of ‘sensible’ diversification. For example complementary confectionary products supported by the same basic marketing messages.
  • Acquiring activities that are substitutes for one’s products. Hence a firm can cover the threat from substitutes implicated as one of Porter’s 5 Forces. For example Canon moving into digital camera's.
  • Acquiring competitors. In this way reducing the threat from competition.
  • Completing the product range which is ‘expected’ by the customer. For example, Microsoft has pursued this strategy with its Microsoft Office Software.

Usage of Horizontal Integration. Applications

Strategic Planning.


Steps in Horizontal Integration. Process

See: Acquisition Integration Approaches


Strengths of Horizontal Integration. Benefits

  • Economies of scale.
  • Synergy. Economies of scope.
  • Defense against substitutes.
  • Reduction in competition.
  • Fulfilling customer expectations.
  • Increased negotiation power. Get more leverage over powerful suppliers or customers.

Limitations of Horizontal Integration. Disadvantages

  • Synergies may be more imaginary than real. A famous example was SAAB with its cars and aircraft.
  • Substitutes market is often very different. To turn an acquisition into a success is a big and lengthy management challenge.
  • Reduction in competition, or even a monopoly, may lead to anti-trust issues.

Horizontal Integration Forum
  Examples and Case Studies of Horizontal Integration
Who can share and explain an example of horizontal integration? Thanks......
     
 
  Disadvantages of Horizontal Integration
Are there besides the limitations mentioned above still more disadvantages of horizontal integration? Why?...
     
 
  Advantages of Horizontal Integration
Are there besides the benefits mentioned above still more advantages of horizontal integration? Why?...
     
 

Horizontal Integration Special Interest Group


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Horizontal Integration Education & Events


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Best Practices - Horizontal Integration Premium

Expert Tips - Horizontal Integration Premium
 

Two More Forms of Strategic Integration

In academic literature there is a mention of at least two more types of developing strategy considered a midddle way between vertical and horizontal i...
Usage (application): Strategy, Corporate Integration
 
 

Resources - Horizontal Integration Premium

Mergers, Acquisitions & Corporate Control

This presentation is about corporate control and mergers and acquisitions, including the following sections:
1. What is Corporate Control?
2...
Usage (application): Corporate Control, Mergers and Acquisitions, Anti-takeover Measures, Synergies
 

Vertical Integration and Horizontal Integration

Simple explanation of the essence of the 2 main models for corporate expansion (vertical and horizontal integration) by comparing it with the human bo...
Usage (application): Difference Between Vertical Integration and Horizontal Integration
 

Antitrust Enforcement

The DOJ-FTC Merger Guidelines were developed for and best deal with horizontal mergers where the theory of harm is coordinated effects. The Guidelines...
Usage (application): Horizontal Mergers
 

Horizontal Mergers

This paper by David M. Spector addresses the effect of horizontal mergers on prices. It is shown that if firms compete in quantities and marginal co...
Usage (application): Competition policy, prices
 

Open Source Projects

Innovation development, production, distribution and consumption networks can be built up horizontally – with actors consisting only of innovation use...
Usage (application): Horizontal Innovation Networks
 
 

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Compare with Horizontal Integration: Vertical Integration  |  Value Chain  |  Porter Five Forces  |  Leveraged Buy-out  |  Acquisition Integration Approaches  |  Parenting Styles  |  Core Competence  |  Insourcing  |  Co-opetition


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