Horizontal Integration

AAA

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.


RELATED TERMS
  1. Midstream

    Term used to describe one of the three major stages of oil and ...
  2. Vertical Integration

    When a company expands its business into areas that are at different ...
  3. Backward Integration

    A form of vertical integration that involves the purchase of ...
  4. Acquisition Indigestion

    A slang term describing an acquisition or merger in which the ...
  5. Upstream

    Operations stages in the oil and gas industry that involve exploration ...
  6. Monopoly

    A situation in which a single company or group owns all or nearly ...
Related Articles
  1. Investing Basics

    Analyzing An Acquisition Announcement

    These deals can make or break investors' returns. Find out how to tell the difference.
  2. Options & Futures

    A Guide To Investing In Consumer Staples

    These companies may not be flashy but they offer investors structure and diversification.
  3. Investing Basics

    Sneaky Subsidiary Tricks Can Cloud Financials

    Use consolidated financial statements to uncover a parent company's true performance.
  4. Investing

    Use Breakup Value To Find Undervalued Companies

    Find out a company's worth if it were sold in pieces - it may be more than you think.
  5. Fundamental Analysis

    What does a high weighted average cost of capital (WACC) signify?

    Find out what it means for a company to have a relatively high weighted average cost of capital, or WACC, and why this is important to lenders and investors.
  6. Fundamental Analysis

    How do economists and psychologists calculate diminishing marginal utility differently?

    Find out why disagreements about the validity of the law of diminishing marginal utility usually boil down to arguments about definitions.
  7. Investing Basics

    Are marginal costs fixed or variable costs?

    Understand how to identify marginal costs as a function of fixed and variable costs. This article addresses how marginal costs vary based on production changes.
  8. Fundamental Analysis

    What does the law of diminishing marginal utility explain?

    Learn about some of the important economic insights that can be derived from applications of the law of diminishing marginal utility.
  9. Economics

    Can Internet companies be vertically integrated?

    Find out how online businesses are beginning to take advantage of vertical integration for many of the same reasons as traditional businesses.
  10. Trading Strategies

    How can retirees protect their wealth in a bear market?

    Look at some helpful hints about how to protect your retirement nest egg when the stock market is underperforming or the economy is in recession.

You May Also Like

Hot Definitions
  1. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  2. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  3. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  4. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  5. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  6. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
Trading Center