What is 'Horizontal Market'

A horizontal market is diversified so that the products created are able to meet the needs of more than one industry. A horizontal market is one in which the output good or service is widely used and in wide demand, thus the producers bear little risk in demand for their output, however will typically face a great amount of competition within the industry.

BREAKING DOWN 'Horizontal Market'

The profitability for companies producing goods in a horizontal market is determined more by internal, rather than external, factors, as their products are commonly used. An example of a horizontal market is the demand for pens across any and all industries. Pens are used in basically all industries, therefore success or failure for pen producers is determined by internal decisions and factors, rather than macro events.

Horizontal Markets vs. Vertical Markets

Businesses that operate in a horizontal market system seek to appeal to a wide demographic that’s not really niche. For example, a reseller of general office furniture is probably not going to target (sell to) other companies that specialize in office furniture. Rather, they’re going to target all types of businesses that maintain offices – accounting firms, travel agencies, insurance agencies, etc. Their market is anyone who needs office furniture.

Vertical marketing tries to attract a very niche demographic. For example, this could include a manufacturer of solar panel technology. These types of firms usually sell their goods to solar contractors and installers. In other words, those they sell to are usually businesses that compete against one another.

Horizontal markets are:

  • Defined by a demographic feature that applies to different kinds of businesses
  • Broader than vertical markets
  • Usually cooperative and seeking joint opportunities
  • An opportunity to market to a general audience

Vertical markets are:

  • A group of businesses that share the same industry
  • Always specific and cannot cross industries
  • Often competing against each other
  • An opportunity to market to a specific audience

Although the types of markets have clear differences, a business' operations can often be characterized as serving both horizontal and vertical markets at the same time. For example, a shoe company can market horizontally to the area in which it is located. It could also market vertically to anyone considering a new pair of shoes. A children’s book publishing company can market horizontally to literate people or vertically to children and parents.

Knowing which horizontal and vertical markets your company wants to serve can be helpful to its marketing success. By defining your markets, you can better advertise and serve your markets’ needs, whether generally or specifically.

RELATED TERMS
  1. Horizontal Integration

    Horizontal integration is the acquisition of a business operating ...
  2. Horizontal Merger

    A horizontal merger occurs when companies in the same industry ...
  3. Horizontal Analysis

    Horizontal analysis is used in financial statement analysis to ...
  4. Horizontal Equity

    Horizontal equity is an economic theory that states that individuals ...
  5. Horizontal Well

    A horizontal well is an oil or gas well that is dug at an angle ...
  6. OHLC Chart

    OHLC, or open-high-low-close, charts are a type of bar chart ...
Related Articles
  1. Investing

    Understanding Vertical Analysis

    In vertical analysis, each line item on a company’s financial statements is presented as a percentage of a larger number.
  2. Trading

    An Introduction to Oscillators

    Find out how this indicator may help improve the average investor's entry and exit points.
  3. Investing

    EUR/USD Consolidates for a Fourth Session

    EUR/USD traded sideways for a fourth straight session after a jump in volatility last week driven by Italy's political climate.
  4. Trading

    Dollar General Reports Earnings at Semiannual Pivot

    Dollar General has a market-neutral P/E ratio of 17.07 with a so-so dividend yield of 1.20% and a positive weekly chart.
  5. Investing

    EUR/USD Catches a Bid From Major Support

    EUR/USD was under pressure in European trading but caught a bid after testing support from a horizontal level that has been in play since late May.
  6. Investing

    Foreign Direct Investment

    Foreign Direct Investment is a form of cross-border investment.
  7. Personal Finance

    How Having a Plan Balances Risk and Security

    Financial security comes from having a tailored plan that takes risks into consideration.
  8. Investing

    EUR/USD Reverses Lower From Resistance

    EUR/USD retreated in early day trading on Tuesday and is on pace to post a bearish engulfing daily candle to snap a three-day win streak.
RELATED FAQS
  1. What business structures expose entrepreneurs to unlimited liability?

    Understand the advantages and disadvantages of a horizontal integration. Learn when a company would want to integrate horizontally. Read Answer >>
  2. When does it makes sense for a company to pursue vertical integration?

    Discover how vertical integration allows firms to take more control over production costs, the quality of its products and ... Read Answer >>
  3. Why would a corporation conduct a vertical FDI?

    Find out why global companies choose to conduct horizontal forward vertical FDI activities to expand their operations into ... Read Answer >>
  4. When is outsourcing preferable to vertical integration?

    Deciding between outsourcing and vertical integration can be challenging. Understand the benefits of each to make the most ... Read Answer >>
  5. What are the legal barriers to vertical integration?

    Learn how embarking on a vertical integration through a merger is liable to run into legal barriers if the integration is ... Read Answer >>
Trading Center