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 direction of companies when considering their growth.
There are two types of horizontal integration:
- Marketing: In the horizontal marketing integration, 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.
Horizontal integration can be executed through actions to buy companies 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 see one of the characteristics of this type of integration: enables companies to leverage their technological, human, etc resources . Another feature is complementarity, since the benefit obtained from horizontal integration processes will depend largely 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 merchandise, took the opportunity to develop an insurance service on the packages they normally transported.
Another aspect of the companies that bet on this type of strategy is the expansionist desire . With the aim of reaching large market shares and high level of expansion, companies choose to acquire similar or competing companies. In this way, even situations close to the monopoly can be reached in certain markets since the level of competition in them is reduced.
At the same happens with Vertica integration l , the practice of horizontal integration can stimulate the creation of economies of scale or scope economies by harnessing the resources mentioned.