An example of horizontal integration in the food industry was the Heinz and Kraft Foods merger. On 25 March 2015, Heinz and Kraft merged into one company, with the deal valued at $46 billion.3132 Both produce processed food for the consumer market. For mid-sized businesses, implementing a horizontal integration strategy opens doors to new resources and strengthens market position. Horizontal integration often leads to higher market concentration, where fewer companies control a greater market share. While this can boost the integrated company’s price control and bargaining power, it may limit consumer options and impact market diversity.

• Businesses looking to achieve scale often begin by developing horizontal integration strategies identifying potential target companies that would enable it to grow.
• Successful horizontal integration of an acquired company requires meticulous planning and execution, from ensuring cultural compatibility to conducting extensive due diligence and aligning strategic objectives.
• Volkswagen benefits by adding a new company to its portfolio – diversifying away from family cars.
• Horizontal integration thus helps create a competitive advantage over other players in the market.
• Recent examples include Disney’s acquisition of 21st Century Fox, CVS Health’s merger with Aetna, and Salesforce’s purchase of Slack, which enhanced capabilities and market reach within their respective industries.

Decrease Shareholder Value

Horizontal integration happens when a company acquires or merges with other companies that operate at the same level in the industry or supply chain. This approach aims to consolidate market power, reduce competition, achieve economies of scale, and expand the company’s reach and product offerings. Key Differences between horizontal and vertical integration lie in their focus on market consolidation and supply chain control, respectively. Horizontal integration seeks to expand market share and reduce competition among similar businesses, leveraging economies of scale and synergies within the same industry segment.

Firm of the Future

• Another notable example of a horizontal integration was Walt Disney Company’s $7.4 billion acquisition of Pixar Animation Studios in 2006.
• This type of horizontal integration aims to pool resources, share expertise, and benefit from synergies that arise from the combination of their strengths.
• For instance, when two firms in the same sector combine their operations, they can benefit from economies of scale, such as reducing per-unit costs by increasing production volume and leveraging shared resources.
• In this way, Coca-Cola was able to cover other fronts by taking over the manufacture of substitute products such as energy drinks in the first instance as occurred with the launch of Powerade and juices.
• Combining different organizational cultures can be challenging and may lead to resistance and morale issues among employees.

To strengthen their market presence and competitive positions, companies will execute one of three horizontal integration transactions–mergers, acquisitions, or internal expansion. The differentiation between each strategy offers distinct advantages, whether combining forces with another company, acquiring a competitor, improving corporate finances, or expanding operations from within. Understanding these different types of horizontal integration is key to navigating the complexities of industry consolidation and leveraging growth opportunities. The merger is expected to develop the new Bank of Baroda as a competitive bank at a global level by gaining advantages or benefits of economies of scale, subsidiaries, synergies for the network, and deposits of low-cost.

A company that now has a 30 percent market share instead of 15 percent has a greater influence. In August 2018, Vodafone India and Idea Cellular merged to create the largest telecommunications firm in India – owning around 35 percent of the market. Both firms were selling telecommunication services such as mobile, phone, and internet providing’s – making it a clear example of horizontal integration. Cultural integration poses another significant risk during horizontal integration. Combining different corporate cultures, management styles, and employee practices can lead to conflicts, morale issues, and operational disruptions.

Procter & Gamble and Gillette: Shaping the Market

The company from Europe is receiving a high number of projects for UAE, but in order to develop them, they need more financial and human resources. India Cements Ltd. (ICL) raised a hostile takeover bid for Rassi Cements Ltd. (RCL) in February 1998. The open offer was made at Rs. 300 per share for 20% shares of RCL and that time the share price of RCL was Rs. 100 on SE (Stock exchange). At the public offer term, RCL’s promoter came forward to make a deal for selling his 32% stake to ICL and that too at a price lower than the price of the open offer.

Horizontal Integration Strategy (with examples)

This merger also aimed at improving customer base, operational efficiency, market reach, and capacity to provide a much wider range of products or services to customers. Selecting horizontal and vertical integration depends on the company’s current market position and long-term growth strategies. Horizontal integration benefits companies aiming to consolidate market power within their industry, as seen with significant mergers and acquisitions in the entertainment and tech sectors. Strategic misalignment is also a risk, where merged companies may struggle to align their long-term goals, business strategies, and operational priorities.

Demerits Of Horizontal Integration Strategy

This is because horizontal integration examples in media refer to a company increasing its production, whether of goods or of services. To truly fall into this category, this increased production must occur in the same part of the supply chain. Horizontal integration can involve mergers and acquisitions or it may refer to a company that has grown via internal expansion. Operational risks include the potential disruption of core business operations during the integration process. Merging companies may face challenges in maintaining customer service levels, fulfilling orders, and managing supply chains, which can impact revenue streams and customer relationships. This merger resulted in a global technology leader worth the US $87 billion that offers the most extensive IT products and services for customers and businesses.

The answer lies in your unique value proposition as well as you own resources and capabilities. An acquisition happens when a firm buys either all shares or most of the shares of another firm in order to have control of that firm. An acquisition takes place once the buying firm obtains or purchases over 50% ownership of another firm. The acquisition is considered as a common horizontal strategy that businesses adopt and may happen with the approval or permission of the target firm. The different types or forms of horizontal integration are acquisitions, mergers, and takeovers.

This merger created the world’s largest hotel company, with a combined portfolio of over 5,700 properties and 30 brands. It allowed Marriott to increase its global presence and offer more options to travelers. Selecting the right company to align with is akin to choosing a dance partner; both of you must move in sync and complement each other’s strengths for a truly standout performance.

Horizontal integrations are more effective when the target company’s management team is willing to negotiate or can see merit in the deal. This leads to more productive conversations, increased buy-in, and fewer chances for the buyer to overpay to force the transaction through. The first, backward integration, occurs when a company purchases a business that produces an input product for the acquiring company’s product–a fast fashion clothing distributor acquiring a fabric manufacturer.

Although Disney has a greater variety of product offerings, it’s main business is situated horizontally from that of Pixar. It is important to note that horizontal integration can also occur between industries – so long as they are at the same stage on the supply chain. For instance, an oil and gas extractor in Saudi Arabia may purchase a coffee bean growing firm in Brazil. Both companies are raw material extractors, so are at the same stage of the supply chain – yet are in different industries. Large, consolidated organizations may struggle to maintain a culture of innovation and agility.

Real-life examples of horizontal integration through mergers

Vertical integration is often undertaken to have better control over a long process, while horizontal integration is more suitable for a company wanting to become more niche for something specific. Horizontal integration often entails similar companies coming together, while vertical integration often entails examples of horizontal integration different companies related to a similar product coming together. Vertical integration is the strategy of expanding across the supply to get better at processes the company is currently not involved in. For example, a manufacturer may acquire a raw materials distributor to have better control over the quantity, pricing, or timing of when it gets raw goods. The company is expanding from its current position in the manufacturing process and performing a backward vertical integration.

Forward integration involves a company taking control of some aspect of the post-production process–the distributor acquiring a retailer to sell the clothing it produces. We know ExxonMobil as one company today, but that entity originates from the 1998 merger between Exxon and Mobil – two separate companies in the oil and gas industry. At the time, the merger was said to be worth over $73 billion – making it the third most valuable company in the world. Yet both firms were operating in the social media industry – offering its consumers a way of socialising and communicating with each other. Employees of the acquired company may resist integration efforts due to uncertainty about their roles and job security. Horizontal integration can enhance the combined brand’s strength and reputation.

The firm may then have a South America, European, Asia, and African division to contend with. So to implement a company-wide change requires significant levels of planning to implement through its various divisions. This is why we have seen many big companies fail through the years – think of Sears, Blockbuster, and Blackberry. Not only can it help the other firm to penetrate the market, but also allow it to introduce other products that it has to offer. Horizontal integration happens when two or more companies producing the same or similar goods or providing the same/similar services merge together to produce a horizontally integrated firm. This acquisition had strengthened the market position of Sun pharma is every aspect such as there was an increase in its net sales, gross profit, net profit, etc.