Explain horizontal and vertical integration.

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Expert Solution

Horizontal integration is a type of business strategy where the firm or company expands its production process in the same industry or supply chain. Here, the expansion of the company is internal. Economically, the horizontal integration can create a monopoly for the company if it includes a major part of the market for the goods or services produced by it. Also, this particular strategy helps in the expansion of the company, lowers the competition faced by it as well as alters the product offerings. On the other hand, being contrast to horizontal integration, vertical integration is a kind of arrangement wherein the company merges with other companies in the same industry but having different production or distribution levels. In order to build up their supply chain, they decide to integrate vertically. Not only this, the vertical integration helps to reduce the company’s cost of production and helps to connect with different channels of distribution. Also, in this type of strategy, a company would acquire another company in the process of supply chain which can either be after it or before the company.

Rahul Sunny answered 1 year ago

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