Horizontal integration: Difference between revisions
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{{Use American English|date = February 2019}} |
{{Use American English|date = February 2019}} |
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{{Short description|Increasing production of at the same level of the supply chain through acquisition, merger or internal expansion}} |
{{Short description|Increasing production of goods/services at the same level of the supply chain through acquisition, merger or internal expansion}} |
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{{Use dmy dates|date = February 2019}} |
{{Use dmy dates|date = February 2019}} |
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[[File:Integration in English.svg|thumb|right|A diagram illustrating horizontal integration and contrasting it with vertical integration.]] |
[[File:Integration in English.svg|thumb|right|A diagram illustrating horizontal integration and contrasting it with vertical integration.]] |
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Revision as of 23:49, 17 November 2021
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Horizontal integration is the process of a company increasing production of goods or services at the same part of the supply chain. A company may do this via internal expansion, acquisition or merger.[1][2][3]
The process can lead to monopoly if a company captures the vast majority of the market for that product or service.[3]
Horizontal integration contrasts with vertical integration, where companies integrate multiple stages of production of a small number of production units.
Horizontal alliance
Horizontal integration is related to horizontal alliance (also known as horizontal cooperation). However, in the case of a horizontal alliance, the partnering companies set up a contract, but remain independent. For example, Raue & Wieland (2015) describe the example of legally independent logistics service providers who cooperate.[4] Such an alliance relates to competition.
Aspects
Benefits of horizontal integration to both the firm and society may include economies of scale and economies of scope. For the firm, horizontal integration may provide a strengthened presence in the reference market. It may also allow the horizontally integrated firm to engage in monopoly pricing, which is disadvantageous to society as a whole and which may cause regulators to ban or constrain horizontal integration.[5]
Media terms
Media critics, such as Robert W. McChesney, have noted that the current trend within the entertainment industry has been toward the increased concentration of media ownership into the hands of a smaller number of transmedia and transnational conglomerates.[6] Media is seen to amass in center where wealthy individuals have the ability to purchase such ventures (e.g., Rupert Murdoch).[citation needed]
That emerged are new strategies for content development and distribution designed to increase the "synergy" between the different divisions of the same company. Studios seek content that can move fluidly across media channels.[7]
Examples
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, the deal valued at $46 billion.[8][9] Both produce processed food for the consumer market.
On 9 December 2013, Sysco agreed to acquire US Foods but on 24 June 2015, the federal judge ruled against the deal saying that such merger would control 75% of the U.S. foodservice industry and that will stifle competition.[10] It would have been horizontal integration, as both distribute food to restaurants, healthcare, and educational facilities.
On 16 November 2015, Marriott International announced that it would acquire Starwood for $13.6 billion, creating the world's largest hotel chain.[11] The merger was finalized on 23 September 2016.[12]
The AB-Inbev acquisition of SAB Miller for $107 Billion which completed in 2016, is one of the biggest deals of all time.[13]
On 1 November 2017, Centurylink bought Level 3 Communications for $34 billion, and incorporated Level 3 as part of Centurylink.
On 14 December 2017, The Walt Disney Company announced a $52.4 billion bid in stock to acquire 21st Century Fox along with its bulk of assets, which included the famed 20th Century Fox film studio and other assets such as FX Networks and 30% stake in Hulu. Both companies produced and distributed films and television series, as well as each owning a 30% stake in Hulu.[14]
See also
References
- ^ "Horizontal Integration Definition". economicshelp.org. Retrieved 5 February 2016.
- ^ "Definition of Horizontal Integration in a Supply Chain". smallbusiness.chron.com. Retrieved 5 February 2016.
- ^ a b "horizontal integration". businessdictionary.com. Retrieved 5 February 2016.
- ^ Raue, Jan Simon; Wieland, Andreas (2015). "The interplay of different types of governance in horizontal cooperations" (PDF). The International Journal of Logistics Management. 26 (2): 401–423. doi:10.1108/IJLM-08-2012-0083. hdl:10398/4de0953a-3920-409a-b63a-60342c976528.
- ^ "Horizontal Integration - What It Really Means For Marketing - Ardor Media Factory". Ardor Media Factory. 19 February 2016. Retrieved 19 February 2016.
- ^ Thorburn, David and Jenkins, Henry (eds.)(2003). Rethinking Media Change: The Aesthetics of Transition. Cambridge, Mass.: MIT Press. p. 283.
- ^ Thorburn, David and Jenkins, Henry (eds.)(2003). Rethinking Media Change: The Aesthetics of Transition. Cambridge, Mass.: MIT Press. p. 284.
- ^ Gelles, David (25 March 2015). "Kraft and Heinz to Merge in Deal Backed by Buffett and 3G Capital". The New York Times.
- ^ "Why You Should Pay Attention to the Heinz/Kraft Merger".
- ^ Gasparro, Annie (July 2015). "Sysco Ends Plans to Merge With US Foods". Wall Street Journal. WSJ. Retrieved 5 February 2016.
- ^ Nycz-Conner, Jennifer (16 November 2015). "Marriott International to acquire Starwood Hotels & Resorts Worldwide in $12.2 billion deal". American City Business Journals.
- ^ Trejos, Nancy (23 September 2016). "Marriott, Starwood merger is complete, loyalty programs will reciprocate". USA Today. Retrieved 24 September 2016.
- ^ "It's Final: AB InBev Closes on Deal to Buy SABMiller".
- ^ Nolter, Chris (December 14, 2017). "Disney Acquires Most of Fox's Assets in Blockbuster $52.4 Billion Stock Deal". TheStreet.com. Archived from the original on December 15, 2017. Retrieved December 15, 2017.