Horizontal integration is a strategic strategy used by companies to expand their customer base and enter new markets. This is often done by acquiring or merging with other companies. As a result, the companies become more efficient in their operations, resulting in less competition. This approach is particularly useful for SMEs and small- to medium-sized businesses. However, it is not suitable for all businesses. If it is the right strategy for your company, make sure you consider the following factors.
The first benefit of horizontal integration is the possibility of achieving territorial expansion. It may be used to merge with a company that offers a similar product or service. In other cases, it may be used for companies that want to start a new business in an unfamiliar area. In this case, horizontal integration is useful as it will provide access to market, client, and environment information that can help them succeed. As a result, this approach can improve a company’s chances of commercial success.
In some instances, companies are unable to reap the benefits of horizontal integration. It can be time-consuming and difficult to implement. Nonetheless, it is highly recommended for companies that are looking to diversify their product offerings and increase their market share. Furthermore, the combination of two companies with similar offerings can increase their profits and market share. In the end, both companies gain a better understanding of the other’s strengths and weaknesses. If this is successful, they will have more resources and less competition to deal with.
Moreover, horizontal integration may not bring about the expected results. It is possible that the merger will not yield the desired synergies and thus, the overall value of the company may suffer. For example, the acquisition of Pixar Animation Studios by the Walt Disney Company in 2006 for $7.4 billion was seen as a risky move as the original company had become stagnant and creative. The Walt Disney Company faced many issues as a result of this strategy, and it had to deal with market saturation and a creative stagnation.
Moreover, Horizontal integration is an excellent strategy for companies that wish to expand their geographical reach. They can acquire similar companies to increase their reach. This strategy is also beneficial for companies that are starting a new business venture in an unknown location. Because the companies are operating in different countries and regions, they can share information about clients and markets. This helps them in achieving their goals. It is also advantageous for shareholders as it results in cost savings.
Despite its risks, horizontal integration is an effective strategy for companies looking to increase their commercial reach. Its advantages include reduced costs, improved resource efficiency, and access to new markets. It also reduces competition, improves profitability, and increases profitability. Further, it helps companies develop new business operations and develop new market positioning. The process of vertical integration also increases the risk of bankruptcy. The aim of this strategy is to eliminate all competitors while improving overall profits.
The process of horizontal integration can be very beneficial to companies, but it is important to be aware of the challenges. This method is complex, time-consuming, and can lead to monopoly and complex management situations. As a result, it can be costly for the companies, but it can also boost their share prices. Therefore, if Horizontal Integration is successful, it is an excellent strategy for achieving territorial expansion. This strategy is advantageous for companies that are seeking to diversify and expand their market.
Another popular strategy is horizontal integration. The idea of merging two companies is to gain a larger market share. By integrating, a company has greater influence and power over its competitors. Combined market share also allows the company to lower costs. The combined business can benefit from the higher sale prices and lower costs. In this way, both companies can increase their profits. The benefits of horizontal integration are many. While some mergers are not perfect, this strategy can be effective for smaller companies.
While horizontal integration has numerous benefits, it may also be counterproductive for companies. It can result in increased competition, monopoly power, and diseconomies of scale. It is also difficult to implement successfully and can be expensive to do. The process of mergers can result in a lower share price. Likewise, companies can also benefit from increased market share. Hence, horizontal integration can be a good strategy for SMEs.