Horizontal Integration

Definition of 'Horizontal Integration'


The acquisition of additional business activities that are at the same level of the value chain in similar or different industries. This can be achieved by internal or external expansion. Because the different firms are involved in the same stage of production, horizontal integration allows them to share resources at that level. If the products offered by the companies are the same or similar, it is a merger of competitors. If all of the producers of a particular good or service in a given market were to merge, it would result in the creation of a monopoly. Also called lateral integration.

Investopedia explains 'Horizontal Integration'


Examples of horizontal integration include an oil company's acquisition of additional oil refineries, or an automobile manufacturer's acquisition of a light truck manufacturer. Horizontal integration offers several advantages, including favorable economies of scale, economies or scope, increased market power and reduction in the costs associated with international trade by operating in foreign markets. Horizontal integration is in contrast to vertical integration, where firms expand into different activities, known as upstream or downstream activities.



comments powered by Disqus
Hot Definitions
  1. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all of the plan’s risk – e.g.: retirement payment liabilities to former employee beneficiaries. The plan sponsor can do this by offering vested plan participants a lump-sum payment to voluntarily leave the plan, or by negotiating with an insurance company to take on the responsibility for paying benefits.
  2. XW

    A symbol used to signify that a security is trading ex-warrant. XW is one of many alphabetic qualifiers that act as a shorthand to tell investors key information about a specific security in a stock quote. These qualifiers should not be confused with ticker symbols, some of which, like qualifiers, are just one or two letters.
  3. Quanto Swap

    A swap with varying combinations of interest rate, currency and equity swap features, where payments are based on the movement of two different countries' interest rates. This is also referred to as a differential or "diff" swap.
  4. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  5. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  6. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
Trading Center