Horizontal Integration

What is Horizontal Integration?

Horizontal integration is a business strategy in which a company expands its operations by acquiring or merging with other companies that operate at the same level of the value chain. It involves the integration of businesses that are involved in the same type of activities or produce the same type of products, either in the same industry or in a related industry.

For example, a company that manufactures automobiles might engage in horizontal integration by acquiring a company that produces car parts or by merging with a company that also manufactures automobiles. In both cases, the company would be expanding its operations by integrating with another business that operates at a similar level in the value chain.

Horizontal integration can be motivated by a variety of factors, including the desire to increase market share, reduce competition, or achieve economies of scale. It can also allow a company to gain access to new technology, intellectual property, or other valuable assets.

However, horizontal integration can also carry risks and challenges, such as the potential for regulatory challenges or difficulties in integrating the operations and cultures of the two companies. It is important for businesses to carefully consider the potential benefits and drawbacks of horizontal integration before pursuing this strategy.