Horizontal integration refers to the process of combining firms of similar functional level in the marketing channel under one management. For example, the owner of a dry cleaning firm can buy or integrate several other existing dry cleaning firms. Horizontal integration also facilitates a firm to generate adequate sales turnover by integrating vertically as well. Under horizontal integration, a firm gains economies of scale and efficiencies in purchasing, advertising, marketing research and specialised personnel. Along with this, a firm also involves large-scale planning, additional marketing research, flexibility and coordination among channel members. All this is possible until all the distribution functions are carried out effectively by various units under an integrated management. Horizontal integration is also referred as ‘horizontal marketing system’. A horizontal marketing system is an association of two or more companies at a similar level to follow a new marketing opportunity. This structun: is formed when the company has shortage of funds, scarce marketing resources, no knowledge of production function and is anxious to start-up alone. While, by operating together, companies can combine their financial, marketing and production resources to achieve more than what an individual company could achieve alone. The companies can integrate efforts With their competitor as well as non-competitors. For example, McDonald’s introduced its express Outlet at Wal-Mart Stores. By this horizontal integration, McDonald’s gets benefit from huge store traffic, whereas Wal-Mart can keep its hungry customers not to go elsewhere to eat.
Advantages of Horizontal Integration
The major advantages of Horizontal Integration are as follows:
- Integration of businesses horizontally helps the company to achieve economies of scale by selling more homogenous products through geographic expansion.
- In HMS, economies of scope can attained by sharing resources that are common in producing different products and the cost of international tmde can be reduced by incorporating production units in foreign countries.
Disadvantages of Horizontal Integration
The disadvantages of horizontal integration are:
- Due to the integration of businesses, size of the company may cause problems like lack of coordination, mis-communication, etc.
- There are greater possibilities of conflict between the channel members.
- This marketing System is very rigid in nature.
