What is Horizontal Integration
Horizontal integration strategy is a corporate strategy that the company expands by acquiring, merging, or take-over a similar business or a different industry. However, the company may offer a new product (from the acquired company) to the current customers.
The company adopts the horizontal integration as a growth strategy when:
- When the company what to increase in size.
- To achieve economies of scale.
- Eliminates a competitor or a potential competitor.
- Enter a new market without starting from 0.
- Increase bargaining power over distributors, suppliers, and customers.
- Reduce competition in intense within an industry.
- To achieve know-how from a purchased company.
- To acquire a new customers (customers from a purchased company) without competition.
The horizontal integration allows the company to take advantage from increase revenues and instantly increase market share in the same market.
Additionally, the horizontal integration strategy does not only benefit the company growth, but the strategy also eliminates a potential competitor (since you acquiring them). This will help the company compete easier in the future with a small number of companies controlling the industry.
To put it simply, horizontal integration is about buying other businesses and continuing the acquired business rather than developing a new product or selling the existing product in the existing market.
Horizontal Integration Examples
For example, a commercial bank acquires an investment bank. A social media company acquires another social media company.
Examples of horizontal integration in real life that you might have heard before include:
- Facebook (now Meta) acquisition of WhatsApp and Instagram
- Microsoft acquisition of Activision Blizzard
- Salesforce acquisition of Slack
- Bank of America acquisition of Merrill Lynch & Co.
- Pfizer acquisition of amplyx
- Hewlett Packard Company (HP) acquisition of Compaq
