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In microeconomics and strategic management, the term horizontal integration describes a type of ownership and control. It is a strategy used by a business or corporation that seeks to sell a type of product in numerous markets. To get this market coverage, several small subsidiary companies are created. Each markets the product to a different market segment or to a different geographical area. This is sometimes referred to as the horizontal integration of marketing. The horizontal integration of production exists when a firm has plants in several locations producing similar products. Horizontal integration in marketing is much more common than horizontal integration in production. It is contrasted with vertical integration.
A monopoly created through horizontal integration is called a horizontal monopoly.
An example
The GAP Inc. retail clothing corporation is a good example of a business that practices horizontal integration. GAP Inc. controls three distinct companies, Banana Republic, Old Navy, and the GAP brand itself. Each company has stores that market clothes tailored to appeal the needs of a different group. Banana Republic sells more expensive clothes with a more "upscale" image, the GAP sells "moderately" priced clothes that appeal to middle-aged men and women, and Old Navy sells "inexpensive" clothes geared towards children and teenagers. By using these three different companies, GAP Inc. has been very successful at controlling a large segment of the retail clothing industry.
In the late nineties the finance industry experienced much horizontal integration, with numerous mergers between companies in the retail banking, investment and insurance industries.
Media terms
In media, horizontal integration is the process by which a media institution owns companies in only one sector of the procuction process (production, distribution or exhibition). An example is disney, they own companies mainly in the exhibition sector with TV channels such as Disney channel and ABC.
See also
- Horizontal market
- Vertical integration
- Chain ownership
- Economies of scale
- List of management topics
- List of marketing topics
- List of economics topics
- Monopoly
- Strategic management
- Target market
Marketing strategies and paradigms | Strategic management | International trade | Marketing | Business terms
"Horizontal integration"