Horizontal integration
Encyclopedia
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 market
s. Horizontal integration in marketing is much more common than vertical integration
is in production.
Horizontal integration occurs when a firm is being taken over by, or merged with, another firm which is in the same industry and in the same stage of production as the merged firm, e.g. a car manufacturer merging with another car manufacturer. In this case both the companies are in the same stage of production and also in the same industry. This process is also known as a "buy out" or "take-over". The goal of Horizontal integration is to consolidate like companies and monopolize an industry.
A monopoly
created through horizontal integration is called a horizontal monopoly.
A term that is closely related with horizontal integration is horizontal expansion. This is the expansion of a firm within an industry in which it is already active for the purpose of increasing its share of the market for a particular product or service.
Strong presence in the reference market
into the hands of a smaller number of transmedia and transnational conglomerates. Media is seen to amass in centre where wealthy individuals have the ability to purchase such ventures (e.g. Rupert Murdoch
).
Horizontal integration, that is the consolidation of holdings across multiple industries, has displaced the old vertical integration of the Hollywood studios. The idea of owning many media outlets, which run almost the same content, is considered to be very productive, since it requires only minor changes of format and information to use in multiple media forms. For example, within a conglomerate, the content used in broadcasting television would be used in broadcasting radio as well, or the content used in hard copy of the newspaper would also be used in online newspaper website.
What emerged are new strategies of content development and distribution designed to increase the “synergy’ between the different divisions of the same company. Studios seek content that can move fluidly across media channels.
Microeconomics
Microeconomics is a branch of economics that studies the behavior of how the individual modern household and firms make decisions to allocate limited resources. Typically, it applies to markets where goods or services are being bought and sold...
and strategic management
Strategic management
Strategic management is a field that deals with the major intended and emergent initiatives taken by general managers on behalf of owners, involving utilization of resources, to enhance the performance of firms in their external environments...
, the term horizontal integration describes a type of ownership and control. It is a strategy used by a business
Business
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
or corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
that seeks to sell a type of product
Product (business)
In general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...
in numerous market
Market
A market is one of many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services in exchange for money from buyers...
s. Horizontal integration in marketing is much more common than vertical integration
Vertical integration
In microeconomics and management, the term vertical integration describes a style of management control. Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product or service, and the products combine to...
is in production.
Horizontal integration occurs when a firm is being taken over by, or merged with, another firm which is in the same industry and in the same stage of production as the merged firm, e.g. a car manufacturer merging with another car manufacturer. In this case both the companies are in the same stage of production and also in the same industry. This process is also known as a "buy out" or "take-over". The goal of Horizontal integration is to consolidate like companies and monopolize an industry.
A monopoly
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
created through horizontal integration is called a horizontal monopoly.
A term that is closely related with horizontal integration is horizontal expansion. This is the expansion of a firm within an industry in which it is already active for the purpose of increasing its share of the market for a particular product or service.
Benefits of horizontal integration
Horizontal integration allows:- Economies of scaleEconomies of scaleEconomies of scale, in microeconomics, refers to the cost advantages that an enterprise obtains due to expansion. There are factors that cause a producer’s average cost per unit to fall as the scale of output is increased. "Economies of scale" is a long run concept and refers to reductions in unit...
- Economies of scopeEconomies of scopeEconomies of scope are conceptually similar to economies of scale. Whereas 'economies of scale' for a firm primarily refers to reductions in average cost associated with increasing the scale of production for a single product type, 'economies of scope' refers to lowering average cost for a firm in...
Strong presence in the reference market
Media terms
Media critics, such as Robert McChesney, have noted that the current trend within the entertainment industry has been toward the increased concentration of media ownershipConcentration of media ownership
Concentration of media ownership refers to a process whereby progressively fewer individuals or organizations control increasing shares of the mass media...
into the hands of a smaller number of transmedia and transnational conglomerates. Media is seen to amass in centre where wealthy individuals have the ability to purchase such ventures (e.g. Rupert Murdoch
Rupert Murdoch
Keith Rupert Murdoch, AC, KSG is an Australian-American business magnate. He is the founder and Chairman and CEO of , the world's second-largest media conglomerate....
).
Horizontal integration, that is the consolidation of holdings across multiple industries, has displaced the old vertical integration of the Hollywood studios. The idea of owning many media outlets, which run almost the same content, is considered to be very productive, since it requires only minor changes of format and information to use in multiple media forms. For example, within a conglomerate, the content used in broadcasting television would be used in broadcasting radio as well, or the content used in hard copy of the newspaper would also be used in online newspaper website.
What emerged are new strategies of content development and distribution designed to increase the “synergy’ between the different divisions of the same company. Studios seek content that can move fluidly across media channels.
See also
- Horizontal marketHorizontal marketA horizontal market is a market which meets a given need of a wide variety of industries, rather than a specific one.-Examples:In technology, horizontal markets consist of customers that share a common need that exists in many or all industries...
- Vertical integrationVertical integrationIn microeconomics and management, the term vertical integration describes a style of management control. Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product or service, and the products combine to...
- Economies of scaleEconomies of scaleEconomies of scale, in microeconomics, refers to the cost advantages that an enterprise obtains due to expansion. There are factors that cause a producer’s average cost per unit to fall as the scale of output is increased. "Economies of scale" is a long run concept and refers to reductions in unit...
- List of management topics
- List of marketing topics
- List of economics topics
- MonopolyMonopolyA monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
- Strategic managementStrategic managementStrategic management is a field that deals with the major intended and emergent initiatives taken by general managers on behalf of owners, involving utilization of resources, to enhance the performance of firms in their external environments...
- Target marketTarget marketA target market is a group of customers that the business has decided to aim its marketing efforts and ultimately its merchandise. A well-defined target market is the first element to a marketing strategy...