Horizontal integration is the process of acquiring or merging with competitors, leading to industry consolidation. It is a strategy where a company acquires, mergers, or takes over another company in the same industry value chain. It is a type of integration strategy pursued by a company to strengthen its position in the industry. A corporate that implements this type of strategy usually mergers or acquires another company that is in the same production stage.
The purpose of horizontal integration is to grow the company in size, increase product differentiation, achieve economies of scale, reduce competition, or access new markets. When many firms pursue this strategy in the same industry, it leads to industry consolidation.
The merger is the joining of two similar sizes, independent companies to make one joint entity. The acquisition is the purchase of another company. A hostile takeover is the acquisition of a company, which does not want to be acquired. Example of Horizontal Integration: Domino’s buys largest German pizza chain in $86m deal.
- Reduces the competition by reducing the number of companies.
- It refers to the expansion of business at the same point in the supply chain.
- wide range of sales and services.
- The potentiality of the Business.
- Enhancing technology and resources.
- Developing manufacturing abilities and production abilities.
Disadvantages of Horizontal Integration
- It is very complicated to handle all aspects of the business to top management.
- The disadvantage of this type of merger is that it is difficult to integrate the culture, employee behavior.
- Larger companies are harder to handle and they are less adaptable in bringing developments with the business.
- It causes to monopoly market, it is the only source to supply things, so it a hard time for end-users.