Strategy - Strategic choices - Joining forces: horizontal and vertical integration

7 important questions on Strategy - Strategic choices - Joining forces: horizontal and vertical integration

What are the two forms of co-operation in a business column?

  • Horizontal integration: the degree of owning and controlling similar activities in a certain business column
  • Vertical integration: the degree to which a firm owns or controls its upstream suppliers or downstream buyers

What is the reason for horizontal integration for a company?

To obtain a more dominant position in certain parts of the production process

In which 2 ways can horizontal integration be achieved?

  • Horizontal merger: merger between firms that produce/sell similar products in a similar market
  • Scale alliance: cooperation agreement without an equity transaction with firms that sell similar products in similar markets
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What is the reason for a horizontal merger?

  • Insufficient organic growth
  • Weak strategic position

How can vertical integration be achieved?

  • Aquiring companies
  • Cooperating via link alliances

What are the 2 types of vertical integration?

  • Backward integration: more stable supply of inputs
  • Forward integration: securing more stable market

What is a vertical merger?

Merger of two firms in different positions in the value chain

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