HORIZONTAL INTEGRATION

In microeconomics and strategic management, the term 'horizontal integration' describes a type of ownership and control. It is a strategy used by a business or corporation that seeks to sell a type of product in numerous markets. To get this market coverage, several small subsidiary companies are created. Each markets the product to a different market segment or to a different geographical area. This is sometimes referred to as the horizontal integration of marketing. The horizontal integration of production exists when a firm has plants in several locations producing similar products. Horizontal integration in marketing is much more common than horizontal integration in production. It is contrasted with vertical integration.
A
★ monopoly created through horizontal integration is called a horizontal monopoly.
Usually a monopoly is created through both horizontal and vertical integration. The situation in which a company takes over another in the same business, thus eliminating a competitor (competition) and achieving both a broader market, and greater economies of scale, but also takes over its upstream suppliers and its downstream buyers, therefore reducing production costs
A term that is closely related with horizontal integration is horizontal expansion. This is the expansion of a firm within an industry which it is already active, the purpose is to increase its share of the market for a particular product or service.

Contents

Benefits of horizontal integration

Media terms

See also

Benefits of horizontal integration

Horizontal integration allows:

★ Economies of scale

★ Economies of scope

★ Strong presence in the reference market
However, horizontal integration may lead to a monopolistic environment which may raise concern regarding antitrust authorities.

Media terms

In media, horizontal integration is the structure through which a media institution owns companies in only one sector of the industry (production, distribution or exhibition). An example is the merger between Boeing and McDonnell Douglas or Exxon and Mobil.

See also

★ Horizontal market

★ Vertical integration

★ Economies of scale

★ List of management topics

★ List of marketing topics

★ List of economics topics

★ Monopoly

★ Strategic management

★ Target market