Question

Describe Horizontal Integration.

Answer 1

Answer:

horizontal integration is the acquisition of a business operating at the same level of the value chain in a similar or different industry.

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Answer 2

Answer:

Horizontal integration is the acquisition of a business operating at the same level of the value chain in a similar or different industry. This is in contrast to vertical integration, where firms expand into upstream or downstream activities, which are at different stages of production

Advantages of Horizontal Integration:

Companies engage in horizontal integration to benefit from synergies. There may be economies of scale or cost synergies in marketing, research and development (R&D), production and distribution. Or there may be economies of scope, which make the simultaneous manufacturing of different products more cost-effective than manufacturing them on their own. Proctor & Gamble’s 2005 acquisition of Gillette is a good example of a horizontal merger which realized economies of scope. Because both companies produced hundreds of hygiene-related products from razors to toothpaste, the merger reduced the marketing and product development costs per product.

Synergies can also be realized by combining products or markets. Horizontal integration is often driven by marketing imperatives. Diversifying product offerings may provide cross-selling opportunities and increase each business’ market. A retail business that sells clothes may decide to also offer accessories, or might merge with a similar business in another country to gain a foothold there and avoid having to build a distribution network from scratch.