Horizontal and Vertical integration

1. Horizontal and Vertical
integration

2. Horizontal integration
• Horizontal integration is the process of a company increasing
production of goods or services at the same part of the supply chain. A
company may do this via internal expansion, acquisition or merger. The
process can lead to monopoly if a company captures the vast majority
of the market for that product or service.

3. Vertical integration
• Vertical integration is a strategy where a company expands its business
operations into different steps on the same production path, such as
when a manufacturer owns its supplier and/or distributor.

4. Horizontal integration
Advantages-
• May benefit from increased economies of scale
• Rationalisation of staff and capital to increase effiency
• Example: Goodyear and Dunlop
Disadvantages-
• Making the company bigger means bigger problems, bigger companies
are harder to handle.

5. Vertical integration
Advantages-
• Reduce transportation costs if common ownership results in closer
geographic proximity
• Improve supply chain coordination.
• Provide more opportunities to differentiate by means of increased control
over inputs.
Disadvantages-
• Capacity balancing problems
• Decreased flexibility
• Can create some barriers to market entry