Top 3 Examples Of Horizontal Integration Medium

examples of horizontal integration

When companies merge, they can often eliminate redundancies and reduce costs by sharing resources. For example, if two companies merge, they may be able to combine their sales forces, resulting in fewer employees and lower overhead costs. However, it is important to recognize that not all horizontal integration and HHI strategies are successful.

What is an example of a horizontal merger with Disney?

One of the most famous examples of a horizontal merger is the deal between Walt Disney and Pixar, announced by the Walt Disney Company on January 24, 2006, signed on May 5, 2006, and worth $7.4 billion. Disney is a mass media and entertainment company, and Pixar is a notorious computer animation studio.

Disney — Pixar

By consolidating with other companies in the same industry, businesses can gain a larger share of the market and increase their influence. This can lead to greater pricing power, allowing companies to charge higher prices for their products or services. Horizontal integration is a strategy that companies use to expand their market reach by consolidating with other businesses that operate in the same industry. This form of integration is becoming increasingly popular, as it offers several benefits to companies that use it. From increased market power to cost savings, horizontal integration has many advantages that can help businesses grow and succeed. The merger allowed Exxon and Mobil to combine their resources, expertise, and technology to streamline operations and reduce costs.

  1. Horizontal integration is the strategy of acquiring other companies that reside along a similar area of the supply chain.
  2. Choosing between these two options highly depends on your current financial capabilities, target goal, niche, and other details.
  3. The real-world examples discussed in this section demonstrate how horizontal equity can be implemented in various aspects of our lives, from taxation to employment.
  4. Successful horizontal integration of an acquired company requires meticulous planning and execution, from ensuring cultural compatibility to conducting extensive due diligence and aligning strategic objectives.
  5. By expanding their product offerings or entering new markets through acquisitions, companies can strengthen their position in the industry.
  6. The companies involved in vertical integration each have their own unique role at different stages of the production process.

Expanded offerings can attract new customers, increase cross-selling opportunities, and enhance companies’ abilities to meet diverse market demands. Reduced competition can lead to increased pricing control and improved profit margins, as integrated companies face less pressure to compete on price. For example, Microsoft specifically wanted to enhance its presence in the video game market.

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. The company’s most significant acquisitions have invariably been in warehouses and distribution centers, ensuring it has the footprint to deal with the expanding e-commerce market. This strategy proposed merger is particularly effective when companies want to gain greater control over their market and streamline operations to reduce costs. 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.

Examples of Horizontal Integration Examples

The global air cargo industry experienced a significant price-fixing scandal in the 2000s. Multiple airlines, including British Airways, Korean Air, examples of horizontal integration and Qantas, were implicated in a conspiracy to artificially inflate prices for cargo transportation services. Through collusion, the airlines coordinated surcharges and manipulated pricing mechanisms, resulting in higher costs for consumers and businesses. The scandal was exposed by authorities in various countries, leading to substantial fines and reputational damage for the airlines involved. By promoting horizontal equity, we can create a more just and equitable society where everyone has an equal chance to succeed.

Best Practices for Implementing Horizontal Integration and HHIOriginal Blog

When companies decide to merge with or acquire a peer in the same industry, planning strategically ensures that the move strengthens their market position and operational capabilities. Mergers of companies with complementary or overlapping product lines result in entities offering broader ranges of goods or services to customers. Cost efficiency often results in lower per-unit production costs, allowing the companies to offer more competitive pricing or increase profit margins. Vertical integration occurs when a company acquires a company outside of their current position along the supply chain. For example, a manufacturer may acquire a retail company so that the manufacturer can not only control the process of making the good but also selling the good as well.

How is Facebook horizontally integrated?

Facebook's acquisition of Instagram illustrates horizontal and vertical integration within the technology sector. Both companies operated in the social media industry, and by acquiring Instagram, Facebook gained a larger share of the social media market.

Horizontal integration occurs when a company merges with or acquires another company in the same industry, aiming to increase market share and reduce competition. Like any merger, horizontal integration does not always yield the synergies and added value that was expected. Procter & Gamble’s 2005 acquisition of Gillette is a good example of a horizontal merger that realized economies of scope.

Whether you want to reduce costs, gain more control over the market, or expand your existing business. 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. Marriott International’s merger with Starwood Hotels exemplifies horizontal integration in the hospitality industry. The merger of two companies within the same sector created the world’s largest hotel chain. The merger expanded Marriott’s global footprint, offering customers a more extensive range of services and locations. Merging operations through horizontal integration allows companies to achieve economies of scale.

  1. Both companies operated in the social media industry, and by acquiring Instagram, Facebook gained a larger share of the social media market.
  2. The merger also allowed Dell to gain a stronger foothold in the enterprise market and compete more effectively with other tech giants like HP and Lenovo.
  3. If integrated properly, the profit margins of the merged company are likely to increase, although the revenue synergies can take substantially more time to materialize (or may never actually occur).
  4. 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.
  5. Companies can also embark on horizontal integration by making more conscious allocations of internal capital.
  6. Before expanding the scope of the firm through horizontal integration, management should be sure that the imagined benefits are real.

This way, Facebook acquired a competitor while growing bigger and getting more capabilities. The merger allowed Facebook to attract more users and grow its positions among other social media. Another business that integrated vertically and won the competition game is Mcdonald’s.

examples of horizontal integration

The Ultimate Guide to the Due Diligence Process in M&A

For example, in 2016, the proposed merger between Staples and Office Depot was blocked by the federal Trade commission due to concerns about reduced competition in the office supply market. The deal, valued at over $13 billion, allowed Marriott to achieve cost savings through economies of scale and increased market power, giving the new company a competitive edge in the crowded hospitality market. Facebook’s acquisition of Instagram illustrates horizontal and vertical integration within the technology sector.

What is an example of horizontal integration in real life?

More recent examples of horizontal integration include Walt Disney Company's acquisition of 21st Century Fox, Marriott International's acquisition of Starwood Hotels & Resorts, and the Facebook (Meta) acquisition of Instagram.


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