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 Well

    A horizontal well is an oil or gas well that is dug at an angle ...
  2. Horizontal Line

    A line that appears to proceed from left to right, or parallel ...
  3. Horizontal Analysis

    A procedure in fundamental analysis in which an analyst compares ...
  4. Horizontal Audit

    A horizontal audit involves an audit of the same activity across ...
  5. Horizontal Channel

    Using trendlines to connect variable pivot highs and lows shows ...
  6. Vertical Well

    A well that is not turned horizontally at depth, and which allows ...
Related Articles
  1. Trading

    An Introduction to Oscillators

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

    Understanding Production Efficiency

    Production efficiency is the point at which an economy cannot increase output of a good or service without lowering the production of another product.
  3. Financial Advisor

    The US States That Produce the Most Oil

    Learn what eight states produce over 90% of U.S. oil, and how fracking has helped the United States become the world's largest oil-producing nation.
  4. Insights

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  5. Investing

    Great Company Or Growing Industry?

    Look at the big picture when choosing a company - what you see may really be a stage in its industry's growth.
  6. Investing

    Don’t Panic When the Next Bear Market Happens

    Take advantage of the next bear market and watch your investment in great companies grow.
  7. Insights

    Digging Deeper Into Bull And Bear Markets

    Discover why it's important to know the characteristics of bull and bear markets, the two types of market conditions.
  8. Investing

    EUR/USD Consolidates After a Steep Decline

    EUR/USD consolidated at support after making a notable technical break.
RELATED FAQS
  1. How are direct costs allocated differently than indirect costs?

    Learn about some great examples of horizontal integration. Understand what constitutes a horizontal integration and why companies ... Read Answer >>
  2. What is the difference between horizontal integration and vertical integration?

    Horizontal integration refers to acquiring a company in the same industry; vertical integration refers to a company acquisition ... Read Answer >>
  3. How can companies reduce internal and external business risk?

    How Companies Can Reduce Internal and External Business Risk. Learn How a Company Can Reduce Each Type of Operational Risk. Read Answer >>
  4. How are industrial goods different from consumer goods?

    Understand the difference between industrial goods and consumer goods, and learn the different types of industrial goods ... Read Answer >>
  5. How does aggregate demand affect price level?

    Read about the relationship between aggregate demand and the general price level, and learn why it is difficult to determine ... Read Answer >>
Hot Definitions
  1. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  2. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  3. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  4. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  5. Inventory Turnover

    Inventory turnover is a ratio showing how many times a company has sold and replaces inventory over a period.
  6. Watchlist

    A watchlist is list of securities being monitored for potential trading or investing opportunities.
Trading Center