Integration Case

Explain both the advantages and disadvantages in general of firms in a horizontally integrated sector against those in more diversified businesses, which are vertically integrated or conglomerates.

Introduction

This report aims to analyse and examine empirical evidence on the advantages companies will gain and the disadvantages they may come across when using the main types of business integration; horizontal, vertical, or conglomeration.

Horizontal Integration - Advantages

Horizontal growth is achieved by external or internal expansion normally through the format of takeovers and merger situations for companies that offer similar or the same types of products and services. Horizontal integration as defined by Cox and Brittain (2004) is where: "Similar firms at the same stage of the process of production and distribution come together." Companies of all sizes and industries worldwide are taking the opportunity to widen their competitiveness by merging together as the effectiveness of horizontal integration results in organisational advantages such as reducing; waste, duplication, fragmentation, inconsistencies, incompatibilities, and fragmentation. Overall advantages of horizontal integration include;

Economies of scale; are an advantage because if the company now has a geographic expansion it is able to sell more of the same products.

An increased market power; the market share could be expanded or extended as new products could be purchased, it could also be possible to buy new technology, more management, and fixed assets.

Economies of scope;

A reduction in the competition,

Customer expectations fulfilled,

Synergies created; Synergy is when two companies or firms join or merge together in the view