Horizontal integration refers to having ownership in competitors’ firms. When a company adopts this strategy, it purchases a firm that produces similar products in the industry. Many companies use a horizontal integration strategy as a growth strategy.
This strategy is usually implemented through mergers and acquisitions.
Combinations of two pharmaceutical companies, two sweater manufacturing firms, two shoe companies, or two laundry soap producers can be termed horizontal integrations.
A horizontal integration strategy is suitable for a company when;
- It can gain monopolistic characteristics in a particular area without being challenged by the government for “tending substantially to reduce competition.
- It competes in a growing industry.
- Increased economies of scale provide major competitive advantages.
- It has the capital and human resources to manage an expanded organization successfully.
- Competitors are faltering due to a lack of managerial expertise or a need for particular resources.