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When a company wishes to grow through a horizontal integration, it is looking to acquire a similar company in the same industry. It may be seeking to increase its size, diversify its product offerings or services, achieve economies of scale, reduce competition, or gain access to new customers or markets. Some great examples of a horizontal integration are Marriott's 2016 acquisition of Sheraton (hospitality industry), Anheuser-Busch InBev's (AB InBev) 2016 acquisition of SABMiller (beer companies), AstraZeneca's 2015 acquisition of ZS Pharma (biotech), Facebook's 2012 acquisition of Instagram (social media), and Disney's 2006 acquisition of Pixar (entertainment media).

A company looking to achieve vertical integration is seeking to acquire a company that operates in the production process of the same industry It may be seeking to strengthen its supply chain, reduce its production costs, capture upstream or downstream profits, or access downstream distribution channels. To do this, one company acquires another company that is either before or after it in the supply chain process. Some great examples of vertical integration include Google's 2011 acquisition of smart phone producer Motorola, Ikea's 2015 purchase of forests in Romania to supply its own raw materials, and Amazon's integration into hardware by producing Kindle Fire tablets.

When it comes to a vertical integration, a company can either integrate forward in a forward integration or backward in a backward integration. A backward integration occurs when a company decides to own another company that makes an input product to the acquiring company's product. An example of this is if a car manufacturer acquires a tire manufacturing company. A forward integration occurs when a company decides to take control of the post-production process. An example of this is if the same car manufacturer acquires an automotive dealership.

Understand why a company would choose vertical integration over outsourcing, or vice versa, by reading When Does it Make Sense for a Company to Pursue Vertical Integration? and When is Outsourcing Preferable to Vertical Integration?

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RELATED TERMS
  1. Backward Integration

    A form of vertical integration that involves the purchase of ...
  2. Forward Integration

    A business strategy that involves a form of vertical integration ...
  3. Vertical Market

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  4. Horizontal Acquisition

    The acquisition of one company by another in the same industry. ...
  5. Horizontal Well

    A well that is turned horizontally at depth, and that allows ...
  6. Economic Integration

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