Lateral expansion in economics

Economics

Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

, is the growth of a business enterprise through the acquisition of similar companies, in the hope of achieving economies of scale

Economies of scale

Economies 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...

 or economies of scope

Economies of scope

Economies 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...

. Unchecked lateral expansion can lead to powerful conglomerates

Conglomerate (company)

A conglomerate is a combination of two or more corporations engaged in entirely different businesses that fall under one corporate structure , usually involving a parent company and several subsidiaries. Often, a conglomerate is a multi-industry company...

 or monopolies.

Related is vertical expansion, which is the growth of a business enterprise through the acquisition of companies that produce the intermediate goods needed by the business or help market and distribute its final goods. Any such value chain

Value chain

The value chain, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance.-Firm Level:...

activities can be acquired through vertical expansion.