Horizontal Integration

Horizontal Integration is a form of business growth strategy used by companies looking to increase their market share and leverage existing resources. It is the process of combining two or more similar businesses within the same sector, typically done by taking over a competitor and incorporating them with the parent business. Horizontal integration offers a variety of advantages for businesses, such as expanding market reach, gaining access to new products and services, and increasing operational efficiencies.

Horizontal integration is when a company decides to expand its market presence or share of the market through acquisitions. It involves merging or taking over another company that is producing similar products in the same industry. Through horizontal integration, companies can gain more market share, reduce competition, and establish stronger economies of scale. The result is an increased capability to control production, pricing, and distribution. Moreover, the company may gain access to technology or knowledge that they previously didn’t have.

For example, if a company dealing in consumer electronics wanted to increase its market share, it might pursue horizontal integration by taking over a competitor’s business. It would then have control of both businesses and could leverage the resources and technology of the companies to create a more efficient and better-positioned business.

Horizontal integration is not to be confused with vertical integration, which involves acquiring businesses in different stages of the production chain.

A prime example of horizontal integration in practice is the acquisition of Whole Foods Market by Amazon in 2017. Amazon was primarily an online retailer— delivering goods to customers via the internet. By acquiring Whole Foods, Amazon suddenly extended its presence into physical stores and has since leveraged Whole Foods’ existing infrastructure and technology to dominate the American grocery market. This a great example of how horizontal integration can be used to increase market share, gain new products, and acquire the resources and knowledge of another business.