Disadvantages of Horizontal Integration

Horizontal Integration
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ahmed zerrouki
teacher, Algeria
Are there besides the limitations mentioned above still more disadvantages of horizontal integration? Why? (...) Read more? Sign up for free

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Horizontal Integration Disadvantages

Horizontal integration has little flexibility and contributes little to the improvement of the stability of the company.

  Jaap de Jonge
Editor, Netherlands

Disadvantages of Horizontal Integration

The disadvantages of horizontal integration we already mentioned in the summary of horizontal integration are:
- 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.

  Jaap de Jonge
Editor, Netherlands

More Disadvantages of Horizontal Integration

Other disadvantages could be: - Lower total value. M&A attempts quite often decrease value to the companies or fail altogether because the expected synergies never materialize.
- Legal repercussions. Horizontal integration can lead to a monopoly or very powerful competitive position, which is highly discouraged by both national governments and international organizations like the EU due to lack of competition and associated innovation. Often, these legal entities require previous approval any larger M&A before it can happen.
- Reduced flexibility. Large organizations are harder to manage and they typically are less flexible in introducing innovations to the market.


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