UNIT

1. Horizontal and vertical integration
Horizontal
Horizontalintegration is where an organisation buys up competitors in the
same marketsegment in order to expand and develop. An example is when
BBC and Dragons den (two firms in the sameindustry) collaborate and begin
working together.
Advantages Disadvantages
Higher efficiency Larger companies are harder handle
Economies of scale Horizontalintegration can prompt monopoly
Economics of scope Reduction in overall value
Internationaltrade
Vertical
Vertical integration is when companies that are at two different stages of
production but are in the same industry mergetogether. For example, a 20th
Century Fox owns the studios in Hollywood, they also own the cinemas, the TV
channels and the DVD rental shops.
Advantages Disadvantages
Itenables you to investin greatly specialized assets Capacity Balancing Problems
Lower Costs of Transaction Decreased Flexibility
High certainty when it comes to quality Can Create Some Barriers to Market Entry