Horizontal integration

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Horizontal integration
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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[citation needed].

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.

[edit] 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.

[edit] 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.

[edit] 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

Retrieved from "http://en.wikipedia.org/wiki/Horizontal_integration"

Categories: Articles lacking sources from March 2007 | All articles lacking sources | All articles with unsourced statements | Articles with unsourced statements since June 2007 | Marketing strategies and paradigms | Strategic management | International trade | Marketing | Business terms
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