What Does Horizontal Integration Mean?

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Horizontal integration is a business term for the expansion of a business by introducing products that have a similar value, function or customer target market as existing products or services. It can also refer to acquisitions and mergers with companies that offer comparable products or services.

Significance

Horizontal traditionally means parallel to; in a business sense, this means the acquisition of products or businesses that are parallel to those that a company already manufactures or supplies.

Examples

An oil company that acquires new refineries, a media organization that buys a newspaper or a phone sales company opening offices overseas are examples of horizontal integration.

Considerations

Horizontal integration can help companies save money and increase profits. A company that introduces a new product saves money on set-up costs and overhead if makes or sells it from the same outlet as its other products. It is also cheaper to sell the same product from various locations than it would be to introduce an entirely new product range.

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