This strategic move isn’t just for expanding; it’s about smartly positioning your business for continued – and accelerated – growth. As businesses expand internationally, acquiring local competitors helps them navigate new markets effectively. For example, when Coca-Cola acquired Costa Coffee for $5.1 billion in 2018, it strengthened its presence in the coffee sector globally.

Lower Competition

The acquisition allowed Facebook to reach new demographics and enhance its advertising revenue streams. The integrated company benefitted from a combined user base and offered more control over the social media landscape. Let’s examine three notable cases demonstrating horizontal integration’s power and versatility in different sectors. Expanded offerings can attract new customers, increase cross-selling opportunities, and enhance companies’ abilities to meet diverse market demands.

Walt Disney and Pixar Animation Studios

In contrast to horizontal integration, vertical integration refers to a merger between companies at different levels of the value chain, e.g. upstream or downstream activities. When implemented correctly, horizontal integration can increase the market share and power of two companies. Here are three textbook examples of horizontal integration undertaken by companies that sought to strengthen their positions in the market and enhance their production or distribution stage.

Case Studies of Successful Horizontal Integration

This enhances the comfort and pleasure of reading and reciting literary works by making them easier to learn and remember. These days, alliteration is used beyond the works of prose and poetry, as various companies use the device to pique the interest of its market and generate more sales. It is a clever technique used to make a name stand out prominently in a person’s mind. From nursery rhymes to slogans, tongue twisters to poems, alliteration adds interest and appeal to narratives in the best way possible.

Horizontal and vertical integrations both involve expanding operations but have different goals. Horizontal integration aims to strengthen a company’s position within its current supply chain segment, often to improve products or increase market share. Horizontal integration is a strategy where a company acquires, merges with, examples of horizontal integration or takes over another company in the same industry operating at the same level of the value chain. This strategy is used to increase market share, reduce competition, and achieve economies of scale. One of the critical takeaways from such mergers is the potential for a consolidated market presence that can transform the competitive landscape.

This is because horizontal integration examples in media refer to a company increasing its production, whether of goods or of services. To truly fall into this category, this increased production must occur in the same part of the supply chain. Horizontal integration can involve mergers and acquisitions or it may refer to a company that has grown via internal expansion. Selecting horizontal and vertical integration depends on the company’s current market position and long-term growth strategies. Horizontal integration benefits companies aiming to consolidate market power within their industry, as seen with significant mergers and acquisitions in the entertainment and tech sectors. One of the most definitive examples of horizontal integration was the acquisition of Instagram by Facebook (now Meta) in 2012 for $1 billion.

• Horizontal integration involves acquiring or merging with competitors at the same level of the supply chain.
• It can reduce competition in an industry, which might lead to higher prices for consumers.
• Understanding horizontal integration is essential for any business looking to bolster its market presence or enhance its service offerings.
• We then see share prices fall once the market comes to terms with the fact the efficiencies didn’t come to fruition.
• Horizontal Integration is also a competitive strategy that can create economies of scale, increase market power over distributors and suppliers, increase product differentiation and help enter new markets.

Though the two companies technically join together, one company remains in control. The acquiring company’s staff, executives, and operations often remain in place, while the acquired company’s resources are integrated as management sees fit. When two companies merge, two separate entities create a new, joint organization. The brand of one of those two companies is usually retained, though the composition of operations and personnel is shared between both of the former individual companies. In addition, the product line of both companies is often similar and equally competitive in the market. When merged through horizontal integration, companies that used to compete can cut back on any products that are not performing well in the consumer market and focus on their strongest performers.

By leveraging these benefits, businesses strengthen their competitive edge in the marketplace. The risks include potential antitrust violations if the merger significantly reduces competition. Cultural clashes between merging entities can hamper operations and employee morale. There’s also the chance that expected synergies may not materialize, leading to a decrease in value rather than growth. Ensuring regulatory compliance and cultural compatibility is key to mitigating these risks.

Disney and 21st Century Fox: A Blockbuster Example

This strategy, known as horizontal integration, has transformed industries and reshaped markets. Have you ever wondered how giants like Disney or Facebook achieved their massive influence? Internal expansion through horizontal integration can also involve the integration of different business functions, such as production, marketing, and sales, to streamline operations and increase efficiency. The dynamics of many industries mean that the market can only support three to four large companies. As a result, horizontal integrations become a popular means of acquiring market share.

Enhanced Competitive Advantage

Shortly after that, the combined bank—with assets valued at over $500 billion—changed its name to Bank of America. Still, notably, the company’s share price (using BankAmerica’s share price in 1998 as a reference) is remarkably close to where it was all those years ago. In addition to this content, she has written business-related articles for sites like Sweet Frivolity, Alliance Worldwide Investigative Group, Bloom Co and Spent. With this acquisition, Facebook was able to focus development on improving Instagram and Facebook, instead of on competition between the two. Join them by signing up for our free, weekly newsletter for supply chain and logistics news you can use.

Academic Language (Used in Research, Essays, and Formal Reports)

By merging, two businesses may be able to produce more revenue than they would have been able to do independently. Successful horizontal integration allows companies to leverage their combined strengths, optimize their value and supply chain, and secure a competitive edge in bustling marketplaces. Companies pursuing horizontal integration often seek economies of scale, expand their product lines, or enter new markets by integrating a similar company into their existing business structure. Horizontal integration occurs when a company merges with or acquires another company in the same industry, aiming to increase market share and reduce competition. Merging operations through horizontal integration allows companies to achieve economies of scale.

Horizontal integration is a type of merger where competitors operating in the same market combine their operations to benefit from economies of scale. Another notable example of a horizontal integration was Walt Disney Company’s $7.4 billion acquisition of Pixar Animation Studios in 2006. However, the entertainment giant was facing market saturation with its current operations along with creative stagnation. Facebook sought to strengthen its position in the social sharing space and saw the acquisition of Instagram as an opportunity to grow its market share, reduce competition, and gain access to new audiences.

• Reduced competition can lead to increased pricing control and improved profit margins, as integrated companies face less pressure to compete on price.
• The deal became one of necessity as a new entrant, Jio, took more and more market share away – eventually becoming the market leader in 2019.
• Companies should think of horizontal integration under the following circumstances;
• Both companies operated in the social media industry, and by acquiring Instagram, Facebook gained a larger share of the social media market.
• As of 2022, this clash reduced their market share from approximately 29% to what was 85% in the 1980s.

It means one player would dominate the market and it’s against the idea of the free market. Economies of scale are when you have a lower cost due to the bulky amount of production and manufacturing. A merger is when two independent businesses of the same time decide to share their resources and become a single entity. Horizontal integration could take place in the form of acquisition, merger, and takeover. Horizontal integration is not illegal, but the competition commission has the power to prevent deals from going through if it deems the deal would create a monopoly, or significant market power. This could range from duplicating work to financial over-spend to a decline in efficiency due to a lack of competition.

When is horizontal integration attractive for a business?

Together, the merged entity will have a total asset that is much more than their assets individually. But such a strategy may sometimes create a monopoly in case the new entity is successful in capturing a large part of the market. Marriot bought Starwood Hotels in 2016 and became the world’s largest hotel and Restaurant Company. Marriot has the advantage of being a luxury brand and Starwood had a strong global presence. The objective of the acquisition was to expand the business portfolio of the company.

Understanding these obstacles is crucial for effective strategy implementation. By combining operations, companies can achieve cost efficiencies that are not possible when operating separately. This can include negotiating better terms with suppliers, optimizing distribution networks, and reducing administrative costs through shared services. It can lead to increased market power and control for the companies that successfully engage in this strategy, allowing them to dominate market segments or even entire industries. These actions help Coffee King achieve economies of scale, meaning it can reduce the cost per unit of goods sold and potentially pass these savings on to consumers or increase its profit margins.