What is Horizontal Integration? Definition of Horizontal Integration, Horizontal Integration Meaning and Concept
Horizontal integration is a strategy that a company adopts when it seeks to offer its products or services in different markets. .
As in the case of vertical integration, it is an existing option in the strategic management of companies when considering their growth.
Types of horizontal integration
There are two types of horizontal integration:
- Marketing: In the horizontal integration of marketing, the company seeks to achieve greater market coverage. Through the creation of subsidiary firms, this service is offered for sale or in different market segments.
- Production: In this case, a company establishes a series of plants at different points where similar products are offered. This is usually the least frequent modality.
Characteristics of horizontal integration
Horizontal integration can be carried out through company purchase actions or mergers in the same sector. Apple can serve as an example, since it took advantage of its knowledge and experience in the production of mobile phones to establish itself in the production of tablets with the ipad.
Therefore, we observe one of the characteristics of this type of integration: it allows companies to take advantage of their technological, human resources, etc. Another characteristic is complementarity, since the benefit obtained from horizontal integration processes will largely depend on how complementary the parties or subsidiaries are.
Another notable case of horizontal integration was that carried out by the courier companies, which, taking advantage of their usual service of sending and receiving goods, took advantage of the opportunity to develop an insurance service on the packages they habitually transported.
Another aspect to highlight of the companies that bet on this type of strategy is the expansionist desire. With the aim of reaching large market shares and a high level of expansion, companies choose to acquire similar companies or competitors. In this way, situations close to monopoly can even be reached in certain markets since the level of competition in them is reduced.
As with vertical integration, the practice of horizontal integration can stimulate the creation of economies of scale or economies of scope thanks to the aforementioned use of resources.