Horizontal integration

Horizontal integration using the example of the automotive industry

General

The main reasons for horizontal integration in procurement are increasing purchasing power with the result of improved purchasing conditions (especially lower purchase prices ), in production the use of the law of mass production with the result of fixed cost degression and in sales the improvement of market power through higher market shares . The horizontal integration leads to an externally conditioned company growth , so that the company size increases, which brings economies of scale , agglomeration advantages and cost advantages with it.

A typical horizontal integration was the involuntary amalgamation of farmers , especially smallholders , and their means of production as well as other employees for joint agricultural production from 1952 through forced collectivization in the GDR to form agricultural production cooperatives . From 1965 onwards, binding forms of agricultural cooperative communities emerged. Similar conditions existed in the former Soviet Union with the collective farms or today's kibbuzzim in Israel .

In companies, horizontal integration is part of strategic management . It can in particular be achieved through mergers or company acquisitions at the same processing or trading level. The purchase of the immediate competitor is always a horizontal integration. In the case of multi-product companies , the market can become monopolized if unrestricted horizontal integration is possible. In retail ( discounters , department stores , supermarkets and hypermarkets ) there is a strong horizontal integration in the group .

Horizontal integration is appropriate in supply chain management when the synergies of bundling are greater than the advantages of isolated processing within the business areas .

Horizontal integration is also a type of integrated communication , which describes the connection of communication instruments within a trade level ( consumers , companies as buyers , traders as intermediaries , suppliers , the public , etc.). It also takes place within a company or an authority through an intranet or data warehouse .