Horizontal integration involves a company expanding production of similar goods or services within the same part of the supply chain through internal growth, acquisition, or merger. This can lead to monopoly if the company captures most of the market share. Vertical integration is when a company expands operations into different stages of production, such as a manufacturer owning suppliers and distributors. Both strategies can result in economies of scale but also capacity issues, decreased flexibility, and barriers to market entry if overextended.

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