Horizontal Integration
The horizontal integration of production
exists when a firm has plants in several locations producing similar
products. In microeconomics and strategic management, the term horizontal
integration describes a type of ownership and control. It is a strategy
used by a business or corporation that seeks to sell a type of product
in numerous markets. To get this market coverage, several small subsidiary
companies are created.
Each markets the product to a different
market segment or to a different geographical area. This is sometimes
referred to as the horizontal integration of marketing.
Horizontal integration in marketing is much more common than horizontal
integration in production. It is contrasted with vertical integration.
A monopoly created through
horizontal integration is called a horizontal monopoly.
Usually a monopoly is created
through both horizontal and vertical integration. The situation in which
a company takes over another in the same business, thus eliminating
a competitor (competition) and achieving both a broader market, and
greater economies of scale, but also takes over its upstream suppliers
and its downstream buyers, therefore reducing production costs.
A term that is closely
related with horizontal integration is horizontal expansion. This is
the expansion of a firm within an industry which it is already active,
the purpose is to increase its share of the market for a particular
product or service.
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